EXHIBIT 10.4
CREDIT AGREEMENT
Between
U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION
and
APEX PC SOLUTIONS, INC.
Dated as of December 28, 1995
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . 9
1.3 Rules of Construction . . . . . . . . . . . . . . . . . . . . 9
1.4 Incorporation of Recitals and Exhibits. . . . . . . . . . . . 9
ARTICLE II. REVOLVING LOAN. . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Revolving Note. . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Revolving Loan Fee. . . . . . . . . . . . . . . . . . . . . . 10
2.7 Borrowing Base. . . . . . . . . . . . . . . . . . . . . . . . 10
2.8 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III. TERM LOAN. . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Term Note . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Term Loan Fees. . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV. GENERAL PROVISIONS APPLICABLE TO THE LOANS. . . . . . . . . 13
4.1 Fundings. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Manner of Payment . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4 Book Entry Loan Account . . . . . . . . . . . . . . . . . . . 14
4.5 Computations of Interest. . . . . . . . . . . . . . . . . . . 15
4.6 Default Interest. . . . . . . . . . . . . . . . . . . . . . . 15
4.7 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . 15
4.8 Late Charge . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.9 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.10 Extensions, Renewals, and Modifications . . . . . . . . . . . 15
4.11 Basis for Determining Interest Rate Inadequate or Illegal . . 16
4.12 Interest Cost . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V. CONDITIONS PRECEDENT FOR FUNDINGS UNDER THE LOANS. . . . . . 17
5.1 Conditions Precedent for Initial Funding. . . . . . . . . . . 17
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5.2 Conditions Precedent to Each Subsequent Funding . . . . . . . 19
ARTICLE VI. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 19
6.1 Financial Data. . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Licenses and Permits. . . . . . . . . . . . . . . . . . . . . 21
6.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . 21
6.4 Payment of Charges. . . . . . . . . . . . . . . . . . . . . . 21
6.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Maintenance of Records. . . . . . . . . . . . . . . . . . . . 22
6.7 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Hazardous Substances. . . . . . . . . . . . . . . . . . . . . 22
6.9 Corporate Existence . . . . . . . . . . . . . . . . . . . . . 23
6.10 Notice of Disputes and Other Matters. . . . . . . . . . . . . 23
6.11 Exchange of Note. . . . . . . . . . . . . . . . . . . . . . . 24
6.12 Maintenance of Liens. . . . . . . . . . . . . . . . . . . . . 24
6.13 Other Agreements. . . . . . . . . . . . . . . . . . . . . . . 24
6.14 After-Acquired Collateral . . . . . . . . . . . . . . . . . . 25
6.15 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 25
6.16 Maintenance of Bank Accounts. . . . . . . . . . . . . . . . . 25
ARTICLE VII. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 25
7.1 Dividends and Distributions . . . . . . . . . . . . . . . . . 25
7.2 Transactions with Affiliates. . . . . . . . . . . . . . . . . 26
7.3 Other Indebtedness. . . . . . . . . . . . . . . . . . . . . . 26
7.4 Leases and Leasebacks . . . . . . . . . . . . . . . . . . . . 26
7.5 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.6 Advances and Loans. . . . . . . . . . . . . . . . . . . . . . 27
7.7 Investments . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.8 Consolidation, Merger, and Sale of Assets . . . . . . . . . . 27
7.9 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 28
7.10 Type of Business. . . . . . . . . . . . . . . . . . . . . . . 28
7.11 Change of Chief Executive Office or Name. . . . . . . . . . . 28
7.12 Change in Documents . . . . . . . . . . . . . . . . . . . . . 28
7.13 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.14 Pension Plan. . . . . . . . . . . . . . . . . . . . . . . . . 28
7.15 Debt Service Coverage . . . . . . . . . . . . . . . . . . . . 28
7.16 Funded Debt Coverage Ratio. . . . . . . . . . . . . . . . . . 29
7.17 Working Capital . . . . . . . . . . . . . . . . . . . . . . . 29
7.18 Limitation on Capital Expenditures. . . . . . . . . . . . . . 29
7.19 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 29
8.1 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Power and Authority . . . . . . . . . . . . . . . . . . . . . 29
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8.3 No Violation of Agreements. . . . . . . . . . . . . . . . . . 30
8.4 Recording and Enforceability. . . . . . . . . . . . . . . . . 30
8.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.6 Good Title to Properties. . . . . . . . . . . . . . . . . . . 30
8.7 Licenses and Permits. . . . . . . . . . . . . . . . . . . . . 31
8.8 Properties in Good Condition. . . . . . . . . . . . . . . . . 31
8.9 Financial Statements. . . . . . . . . . . . . . . . . . . . . 31
8.10 Outstanding Indebtedness. . . . . . . . . . . . . . . . . . . 31
8.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.12 License Fees. . . . . . . . . . . . . . . . . . . . . . . . . 32
8.13 Trademarks, Patents, Et . . . . . . . . . . . . . . . . . . . 32
8.14 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.15 Regulations U and X . . . . . . . . . . . . . . . . . . . . . 32
8.16 Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.17 Condition of Property . . . . . . . . . . . . . . . . . . . . 32
8.18 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX. EVENTS OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . 33
9.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Acceleration; Remedies. . . . . . . . . . . . . . . . . . . . 35
ARTICLE X. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 36
10.3 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.4 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.5 Entire Agreement and Amendments . . . . . . . . . . . . . . . 37
10.6 Benefit of Agreement. . . . . . . . . . . . . . . . . . . . . 37
10.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 38
10.8 Descriptive Headings. . . . . . . . . . . . . . . . . . . . . 38
10.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 38
10.10 Consent to Jurisdiction, Service, and Venue . . . . . . . . . 38
10.11 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 39
10.13 Statutory Notice. . . . . . . . . . . . . . . . . . . . . . . 39
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EXHIBITS
Exhibit A -- Revolving Note, Section 2.3
Exhibit B -- Term Note, Section 3.3
Exhibit C -- Prepayment Formula, Section 4.9
Exhibit D -- Security Agreement, Section 5.1(b)
Exhibit E -- Subordination Documents, Section 5.1(d)
Exhibit F -- Opinion of Counsel, Section 5.1(e)
Exhibit G -- Board Resolution and Incumbency Certificate, Section 5.1(i)
Exhibit H -- Existing Liens, Section 7.5
Exhibit I -- Schedule of Trademarks, Trade Names, Service Marks, Patents and
Applications, Section 8.13
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CREDIT AGREEMENT
This credit agreement is made and entered into as of the 28th day of
December, 1995, by and between U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION, a
national banking association ("U. S. Bank"), and APEX PC SOLUTIONS, INC., a
Washington corporation ("Borrower"). Words and phrases with initial capitalized
letters have the meanings assigned in ARTICLE I of this Agreement.
R E C I T A L S :
A. U. S. Bank is a national banking association with its principal
place of business in Seattle, Washington. Borrower is a corporation formed and
existing under the laws of the state of Washington and is engaged in the
business of manufacturing and distributing specialized cabinets and concentrator
switches that allow users to access different computers with different computer
platforms and applications from a single keyboard and monitor.
B. Borrower has requested U. S. Bank to extend to Borrower an
operating line of credit in the amount of $3,000,000 and a term loan to Borrower
in the amount of $6,000,000.
C. U. S. Bank is ready, able, and willing to extend such credit
facilities to Borrower on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
1.1 TERMS DEFINED. As used herein, the following terms have the
meanings set forth below:
"Affiliate" means a Person that now or hereafter, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with Borrower. A Person shall be deemed to control a
corporation or partnership if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management of such corporation or
partnership, whether through the ownership of voting securities, by contract, or
otherwise.
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"Agreement" means this credit agreement and includes all amendments to
this Agreement.
"Applicable Law" means all applicable provisions and requirements of
all (a) constitutions, statutes, ordinances, rules, regulations, standards,
orders, and directives of any Governmental Bodies, (b) Governmental Approvals,
and (c) orders, decisions, decrees, judgments, injunctions, and writs of all
courts and arbitrators, whether such Applicable Laws presently exist, or are
modified, promulgated, or implemented after the date hereof.
"Applicable Margin" means:
(a) With respect to the Term Loan (i) 1.5 percent per annum for Prime
Rate Borrowings, and (ii) 2.75 percent per annum for IBOR Rate Borrowings; and
(b) With respect to the Revolving Loan from the date of the initial
Funding through May 15, 1996, (i) 1.5 percent per annum for Prime Rate
Borrowings, and (ii) 2.75 percent per annum for IBOR Rate Borrowings. With
respect to the Revolving Loan commencing May 16, 1996, and thereafter, the
Applicable Margin shall be adjusted 45 days after the end of each fiscal quarter
of Borrower by reference to the following matrix and based upon Borrower's
financial statements for the preceding fiscal quarter; PROVIDED, however, if
Borrower has not delivered to U. S. Bank its financial statements for the
previous fiscal quarter by the Applicable Margin adjustment date, the Applicable
Margin for the Revolving Loan from such interest rate adjustment date until the
next Applicable Margin adjustment date shall be 1.5 percent per annum for Prime
Rate Borrowings, and 2.75 percent per annum for IBOR Rate Borrowings:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FUNDED DEBT PRIME RATE IBOR RATE BORROWING
COVERAGE RATIO AS BORROWING APPLICABLE MARGIN
OF THE END OF THE APPLICABLE MARGIN
PREVIOUS FISCAL
QUARTER
--------------------------------------------------------------------------------
Less than or equal 1.00% 2.25%
to .75:1.00
--------------------------------------------------------------------------------
Greater than 1.25% 2.50%
.75:1.0 and less
than or equal to
1.00:1.00
--------------------------------------------------------------------------------
Greater than 1.50%* (or default 2.75% * (or default
1.00:1.00 rate, if applicable) rate, if applicable)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* The parties acknowledge that commencing with Borrower's fiscal quarter
ending December 31, 1996, it shall constitute an Event of Default if the
Funded Debt Coverage Ratio is greater than 1.0:1.0 as of the end of any
fiscal quarter of Borrower, and accordingly
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at any such time the default interest rate provided for in this Agreement
will, at the option of U. S. Bank, be applicable.
"Borrower" means Apex PC Solutions, Inc., a Washington corporation,
and its successors.
"Borrowing Base" has the meaning set forth in SECTION 2.7 herein.
"Borrowing Notice" has the meaning set forth in SECTION 4.1(A) herein.
"Britannia" means Britannia Holdings Limited.
"Business Day" means any day except a Saturday, Sunday, or other day
on which national banks in the state of Washington are authorized or required by
law to close.
"Capital Expenditures" means the aggregate amount of capital
expenditures of Borrower as determined in accordance with generally accepted
accounting principles, including leases that are or should be capitalized
pursuant to generally accepted accounting principles.
"Cash Flow" means Borrower's net income (after taxes) for the relevant
period, subject to the following adjustments:
(a) There shall be added to net income: (i) charges against income
consisting of depreciation of real and personal property and amortization, and
(ii) interest expense; and
(b) There shall be deducted from net income: (i) revenues derived from
sources other than continuing operations, such as net gains from sales of
capital assets, restoration to contingency reserves, collection of proceeds of
life insurance policies, write-up of assets, or gains from the sale,
acquisition, or retirement of securities, (ii) cash paid by Borrower during the
relevant period for Capital Expenditures, which cash does not constitute
proceeds of Capital Expenditure loans made to Borrower, and (iii) dividends and
distributions paid to Borrower's shareholders.
"Claims" has the meaning set forth in SECTION 10.11 herein.
"Collateral" means all the property, real or personal, tangible or
intangible, now owned or hereafter acquired, in which U. S. Bank has been or is
to be granted a security interest by Borrower or any other Person, to secure the
Indebtedness of Borrower to U. S. Bank.
"Debt Service" means, as of the last day of the relevant period, the
current portion of long-term Indebtedness of Borrower, including the current
portion of capitalized leases, plus interest expense for the relevant period.
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"Debt Service Coverage Ratio" means the ratio of Cash Flow to Debt
Service.
"Default" means any condition or event that constitutes an Event of
Default or with the giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default.
"Disclosure Schedule" means the disclosure schedule attached as an
exhibit to the Stock and Note Purchase Agreement.
"Eligible Accounts Receivable" means the accounts receivable of
Borrower excluding the following: (a) accounts receivable that have been
outstanding in excess of 60 days past due, (b) all accounts receivable from any
single customer of Borrower if 25 percent or more of such customer's accounts
owed to Borrower are in excess of 60 days past due, (c) accounts receivable due
from officers, employees, or Affiliates of Borrower, (d) accounts receivable
that are partially or wholly subject to the right of setoff (other than accounts
receivable from Fortune 500 companies or their affiliates that are subject to
rights of setoff related to returns of merchandise to Borrower or warranty
claims against Borrower), (e) accounts receivable resulting from COD sales,
finance charges, and consignments, (f) accounts receivable due from Persons not
residents of the United States (other than accounts receivable from affiliates
of Fortune 500 companies), (g) accounts receivable due from the federal
government(1) (h) accounts receivable that constitute any retainage,
(i) accounts receivable that constitute dated xxxxxxxx and (j) accounts
receivable in which any Person other than U. S. Bank has a security interest.
Notwithstanding the foregoing, "Eligible Accounts Receivable" shall not include
any accounts receivable unless and until U. S. Bank holds a first, valid,
binding perfected security interest in any such accounts receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning set forth in SECTION 9.1 herein.
"Excess Cash Flow" means Borrower's net income (after taxes) for the
relevant period, subject to the following adjustments:
-------------------
(1) The parties acknowledge that Borrower has one or more contracts to
supply products to the General Services Administration and therefore
has accounts receivable from the federal government. While such
accounts receivable do not constitute Eligible Accounts Receivable
under the current definition of such term, upon Borrower's request,
U. S. Bank agrees to negotiate with Borrower in good faith with
respect to the terms and conditions for including such accounts
receivable in Eligible Accounts Receivable.
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(a) There shall be added to net income charges against income consisting
of depreciation of real and personal property and amortization; and
(b) There shall be deducted from net income: (i) revenues derived from
sources other than continuing operations, such as net gains from sales of
capital assets, restoration to contingency reserves, collection of proceeds of
life insurance policies, write-up of assets, or gains from the sale,
acquisition, or retirement of securities, (ii) cash paid by Borrower during the
relevant period for Capital Expenditures, which cash does not constitute
proceeds of Capital Expenditure loans made to Borrower, and (iii) an amount
equal to the current portion of Borrower's long-term Indebtedness, including the
current portion of capitalized leases.
"Funded Debt" means any Indebtedness of Borrower that requires
scheduled principal reduction payments and in any event shall include the Term
Loan and capitalized leases, but shall excluded Subordinated Debt.
"Funded Debt Coverage Ratio" means the ratio of Funded Debt as of the
last day of the relevant period to Cash Flow for the relevant period. For
purposes of calculating the Funded Debt Coverage Ratio as of the last day of
each of Borrower's first and fourth fiscal quarters, there shall be excluded
from Funded Debt an amount equal to the amount that the outstanding principal
balance of the Term Loan on the last day of each such respective fiscal quarter
exceeds the amount of the Term Loan Commitment as of (a) May 1 of such year for
calculations as of the last day of Borrower's first fiscal quarter, and
(b) May 1 of the following year for calculations as of the last day of
Borrower's fourth fiscal quarter.
"Funding" means any disbursement of the proceeds of the Revolving Loan
or Term Loan or the issuance or renewal of any Letters of Credit.
"Governmental Approval" means any authorization, consent, approval,
certificate of compliance, license, permit, or exemption from, contract with,
registration or filing with, or report or notice to, any Governmental Body
required or permitted by Applicable Law.
"Governmental Body" means the government of the United States, any
state or any foreign country, or any governmental or regulatory official, body,
department, bureau, subdivision, agency, commission, court, arbitrator, or
authority, or any instrumentality thereof, whether federal, state, or local.
"Hazardous Materials" means oil or petrochemical products, PCB's,
asbestos, urea formaldehyde, flammable explosives, radioactive materials,
hazardous wastes, toxic substances, or related materials including but not
limited to substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," or "toxic substances"
under any Hazardous Materials Laws.
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"Hazardous Materials Claims" means (a) enforcement, cleanup, removal,
or other regulatory actions instituted, completed, or threatened by any
Governmental Body pursuant to any applicable Hazardous Materials Laws; and
(b) claims made or threatened by any third party against Borrower or its
property relating to damage, contribution, cost recovery, compensation, loss, or
injury resulting from Hazardous Materials.
"Hazardous Materials Laws" means all Applicable Laws pertaining to
Hazardous Materials.
"IBOR Borrowing Rate" means the IBOR Rate plus the Applicable Margin.
"IBOR Rate" means for any Interest Period, the rate per annum equal to
the arithmetic average (rounded upward to the nearest 1/16 of 1 percent) of the
rates per annum determined by U. S. Bank as of the times specified in
SECTION 4.1(a) herein on the date two Business Days prior to the first day of
the applicable Interest Period as the rates offered to U. S. Bank by three
Eurodollar money market dealers in such Eurodollar market as may be selected by
U. S. Bank for U.S. dollar deposits to be delivered on the first day of such
Interest Period for the number of months therein; PROVIDED, however, that
U. S. Bank's IBOR Rate shall be adjusted to take into account the maximum
reserves required to be maintained for Eurocurrency liabilities by banks during
each such Interest Period as specified in Regulation D of the Board of Governors
of the Federal Reserve System or any successor regulation.
"IBOR Rate Borrowing" means any Funding or any portion of the
applicable Loan for which Borrower has elected the IBOR Borrowing Rate to apply.
The minimum amount of each IBOR Rate Borrowing shall be $1,000,000 and may only
be in integrals of $100,000 in excess thereof.
"Indebtedness" means all items that in accordance with generally
accepted accounting principles would be included in determining total
liabilities as shown on the liabilities side of the balance sheet as of the date
that "Indebtedness" is to be determined and in any event includes liabilities
secured by any mortgage, deed of trust, pledge, lien, or security interest on
property owned or acquired, whether or not such a liability has been assumed,
and the guaranties, endorsements (other than for collection in the ordinary
course of business), and other contingent obligations with regard to the
obligations of other Persons.
"Interest Period" means as to any IBOR Rate Borrowing, a period of
one, two, three, six, or twelve months commencing on the date the IBOR Borrowing
Rate becomes applicable thereto; PROVIDED however, that: (a) no Interest Period
shall be selected that would extend beyond the maturity date of the applicable
Loan; (b) any Interest Period that would otherwise expire on a day which is not
a Business Day, shall be extended to the next succeeding Business Day, unless
the result of such extension would be to extend such Interest Period into
another calendar month, in which event the Interest Period shall end on the
immediately preceding Business Day; and (c) any Interest Period that begins on
the last
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Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month.
"Investors" means Advent VII L.P., Advent Atlantic and Pacific II
L.P., Advent New York L.P., and TA Venture Investors Limited Partnership.
"Letter of Credit" has the meaning set forth in SECTION 2.8 herein and
includes all renewals, replacements, and amendments thereof.
"Loans" means the Revolving Loan and the Term Loan, as well as all
renewals, replacements, and amendments thereof.
"Loan Documents" means this Agreement, the Notes, the Security
Agreement, and the Subordination Documents, together with all other agreements,
instruments, and documents arising out of or relating to this Agreement or the
Loans, and includes all renewals, replacements and amendments thereof.
"Notes" means the Revolving Note and the Term Note, as well as all
renewals, replacements, and amendments thereof.
"Participant" means any financial institution to which U. S. Bank
sells a participation in any of the Loans.
"Permitted Liens" has the meaning set forth in SECTION 7.5 herein.
"Person" means any individual, partnership, joint venture, firm,
corporation, association, trust, or other enterprise or any Governmental Body.
"Plan" means an employee pension benefit plan that is covered by ERISA
or subject to the minimum funding standards under Section 412 of the Internal
Revenue Code of 1986 and is either (a) maintained by Borrower or any Affiliate
for employees of Borrower or any Affiliate or (b) maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which Borrower or any Affiliate is then
making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Prime Borrowing Rate" means the Prime Rate plus the Applicable
Margin.
"Prime Rate" means that rate of interest announced by U. S. Bank from
time to time as its prime rate. The Prime Rate is not necessarily the lowest
rate of interest charged by U. S. Bank to any classification of U. S. Bank
customers. For purposes of this Agreement, each time the Prime Rate changes, a
contemporaneous change shall occur in the interest rate charged to Borrower on
any Loans then bearing interest at a rate indexed to the
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Prime Rate, effective upon the announcement or publication of any such change in
rate. U. S. Bank shall not be obligated to notify Borrower of any change in the
Prime Rate; however, the Prime Rate is available upon inquiry of U. S. Bank.
"Prime Rate Borrowing" means any Funding or portion of the applicable
loan pursuant to the terms of this Agreement that bears interest at the Prime
Borrowing Rate.
"Revolving Loan" has the meaning set forth in SECTION 2.1 herein and
includes all renewals, replacements, and amendments of the Revolving Loan.
"Revolving Note" has the meaning set forth in SECTION 2.3 herein and
includes all renewals, replacements, and amendments of the Revolving Note.
"Security Agreement" has the meaning set forth in SECTION 5.1(B)
herein and includes all renewals, replacements, and amendments of the Security
Agreement.
"Stock and Note Purchase Agreement" means the stock and subordinated
note purchase agreement executed by Borrower, Xxxxxxxx Xxxx, Britannia, and the
Investors dated December , 1995.
"Subordinated Debt" means the Indebtedness of Borrower to Britannia
and the Investors in the initial principal amount of $20,000,000, which
Indebtedness is subordinated to the Indebtedness of Borrower to U. S. Bank
pursuant to the Subordination Documents.
"Subordination Documents" has the meaning set forth in SECTION 5.1(D)
herein and includes all amendments of the Subordination Documents approved by
U. S. Bank.
"Term Loan Commitment" means $6,000,000 less (on a cumulative basis):
(a) (i) $400,000 on December 31, 1996, (ii) $900,000 on December 31, 1997,
(iii) $900,000 on December 31, 1998, (iv) $900,000 on December 31, 1999, (v)
$900,000 on December 31, 2000, and (vi) $900,000 on December 31, 2001; and
(b) On May 1 of each year, commencing May 1, 1997, an amount equal to 25
percent of Excess Cash Flow during the preceding fiscal year of Borrower;
PROVIDED, however, that in the event that the Funded Debt Coverage Ratio as of
the last day of such preceding fiscal year is less than or equal to 1.0:1.0,
then the Term Loan Commitment shall not be reduced by 25 percent of Excess Cash
Flow on May 1 of the following year. U. S. Bank and Borrower acknowledge that
commencing December 31, 1996, if the Funded Debt Coverage Ratio is greater than
1.0:1.0, there shall exist an Event of Default pursuant to SECTION 7.16, and
U. S. Bank may exercise any remedies available under the Loan Documents or
Applicable Law.
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"Term Loan" has the meaning set forth in SECTION 3.1 herein and
includes all renewals, replacements, and amendments of the Term Loan.
"Term Note" has the meaning set forth in SECTION 3.3 herein and
includes all renewals, replacements, and amendments of the Term Note.
"U. S. Bank" means U. S. Bank of Washington, National Association, a
national banking association, and its successors and assigns.
"Working Capital" means Borrower's current assets, less Borrower's
current liabilities.
1.2 ACCOUNTING TERMS. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with generally accepted accounting
principles consistently applied.
1.3 RULES OF CONSTRUCTION. Unless the context otherwise requires,
the following rules of construction apply to the Loan Documents:
(a) Words in the singular include the plural and in the plural
include the singular.
(b) Provisions of the Loan Documents apply to successive events and
transactions.
(c) In the event of any inconsistency between the provisions of this
Agreement and the provisions of any of the other Loan Documents, the provisions
of this Agreement govern.
1.4 INCORPORATION OF RECITALS AND EXHIBITS. The foregoing recitals
are incorporated into this Agreement by reference. All references to "Exhibits"
contained herein are references to exhibits attached hereto, the terms and
conditions of which are made a part hereof for all purposes.
ARTICLE II. REVOLVING LOAN
2.1 LOAN COMMITMENT. Subject to and upon the terms and conditions
set forth herein and in reliance upon the representations, warranties, and
covenants of Borrower contained herein or made pursuant hereto, U. S. Bank will
make Fundings to Borrower from time to time during the period ending on January
15, 1997, but such Fundings (together with any outstanding Letters of Credit)
shall not exceed, in the aggregate principal amount at any one time outstanding,
$3,000,000 (the "Revolving Loan"). Borrower may borrow, repay, and reborrow
hereunder either the full amount of the Revolving Loan or any lesser sum.
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2.2 USE OF PROCEEDS. The proceeds of the Revolving Loan shall be
used by Borrower for general corporate purposes.
2.3 REVOLVING NOTE. The Revolving Loan shall be evidenced by a
promissory note in the form attached hereto as EXHIBIT A (the "Revolving Note").
2.4 INTEREST RATES. Each time Borrower requests a Funding under the
Revolving Loan, at any time prior to the expiration of each Interest Period for
any IBOR Rate Borrowing, and at any other time with respect to Prime Rate
Borrowings, so long as there exists no Event of Default, Borrower may elect
either the Prime Borrowing Rate or the IBOR Borrowing Rate to apply to such
Funding, such existing IBOR Rate Borrowing at the end of the Interest Period, or
such existing Prime Rate Borrowing. In the event Borrower does not specify an
interest rate election as provided for herein for a requested Funding or prior
to the end of any Interest Period with respect to an existing IBOR Rate
Borrowing, then such Funding or existing IBOR Rate Borrowing at the expiration
of such Interest Period shall be deemed to constitute a Prime Rate Borrowing.
2.5 REPAYMENT.
(a) Commencing on the first day of the first month following the
initial Funding under the Revolving Loan and on the first day of each month
thereafter, Borrower shall pay U. S. Bank an amount equal to all accrued
interest on the Revolving Loan.
(b) Borrower shall pay U. S. Bank all outstanding principal, accrued
interest, and other charges with respect to the Revolving Loan on January 15,
1997.
2.6 REVOLVING LOAN FEE. On January 2, 1996, Borrower shall pay
U. S. Bank a nonrefundable fee for the Revolving Loan in the amount of $7,500.
2.7 BORROWING BASE.
(a) The outstanding balance of principal on the Revolving Loan
(together with any outstanding Letters of Credit) shall at no time exceed an
amount equal to 80 percent of Eligible Accounts Receivable ("Borrowing Base").
(b) Borrower shall submit to U. S. Bank a Borrowing Base certificate
in a form acceptable to U. S. Bank calculating the Borrowing Base and executed
by Borrower on or before the 10th day of each month dated as of the last day of
the prior month if as of the last day of the prior month there were any amounts
outstanding under the Revolving Loan.
(c) If at any time the aggregate principal amount of the Revolving
Loan (together with any outstanding Letters of Credit) exceeds the Borrowing
Base, Borrower shall repay such outstanding portion of the Revolving Loan in an
amount equal to such excess within one Business Day. Borrower's failure to do
so shall constitute an Event of Default.
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2.8 LETTERS OF CREDIT.
(a) Subject to and upon the terms and conditions set forth herein and
in reliance upon the representations, warranties, and covenants of Borrower
contained herein or made pursuant hereto, U. S. Bank will issue standby and
commercial letters of credit (the "Letters of Credit") up to a maximum aggregate
of $3,000,000 for the benefit of Borrower in forms acceptable to U. S. Bank from
time to time and for the period ending on January 15, 1997. The expiration date
of any Letter of Credit shall not extend beyond January 15, 1997. The maximum
aggregate amount of outstanding Letters of Credit plus the aggregate outstanding
amount of principal and interest on the Revolving Loan shall not exceed, at any
one time, $3,000,000.
(b) Prior to the issuance of any Letter of Credit, Borrower shall
execute and deliver to U. S. Bank a letter of credit application and such other
documents as U. S. Bank customarily receives in connection with the issuance of
letters of credit.
(c) Borrower shall pay to U. S. Bank a fee for the issuance of each
Letter of Credit in an amount equal to U. S. Bank's standard fee for the
issuance of letters of credit plus U. S. Bank's handling charges. Such fees may
be paid to U. S. Bank by U. S. Bank making a Funding under the Revolving Loan.
(d) Any draws on Letters of Credit issued by U. S. Bank pursuant to
the terms of this Agreement shall be paid by Borrower immediately upon receipt
of notice from U. S. Bank of such draw. So long as Borrower meets the
conditions to Fundings under the Loans, draws on Letters of Credit may be paid
from Fundings under the Loans. In the event Borrower fails to make such
immediate repayment, U. S. Bank shall be authorized to consider any such draws
as Fundings under the Revolving Loan. In the event Borrower is in Default under
the terms of this Agreement on the date of any such draw, such draw will
nevertheless constitute a Funding on the Revolving Loan and shall not constitute
a waiver of any of U. S. Bank's rights hereunder or under any of the other Loan
Documents. In the event that any Letters of Credit are outstanding upon the
expiration of the Commitment Period for the Revolving Loan, Borrower shall, upon
U. S. Bank's request, deposit with U. S. Bank in a special demand deposit
account set up by Borrower, an amount of cash necessary to cover all outstanding
Letters of Credit. Borrower hereby grants U. S. Bank a security interest in any
such demand deposit account and gives U. S. Bank the authority to debit such
account upon a draw on outstanding Letters of Credit in an amount equal to the
amount paid by U. S. Bank to the beneficiaries of such Letters of Credit. In
the event Borrower does not establish such an account, or in the event the
amount of funds in such account are insufficient to satisfy the obligations of
U. S. Bank under all outstanding Letters of Credit, then all payments made by
U. S. Bank under such Letters of Credit shall automatically constitute Fundings
under the Revolving Loan, notwithstanding the fact that the Commitment Period
for the Revolving Loan has expired. U. S. Bank shall maintain possession of the
Revolving Note until all Letters of Credit have either expired, been canceled,
or been paid by U. S. Bank and U. S. Bank has been reimbursed in full.
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ARTICLE III. TERM LOAN
3.1 LOAN COMMITMENT. Subject to and upon the terms and conditions
set forth herein and in reliance upon the representations, warranties, and
covenants of Borrower contained herein or made pursuant hereto, U. S. Bank will
make Fundings to Borrower from time to time during the period ending on December
31, 2002, but such Fundings shall not exceed, in the aggregate principal amount
at any one time outstanding, the amount of the Term Loan Commitment (the "Term
Loan"). Borrower may borrow, repay, and reborrow hereunder either the full
amount of the Term Loan or any lesser sum.
3.2 USE OF PROCEEDS. Initially the proceeds of the Term Loan shall
be used solely to (a) repay Indebtedness of Borrower in the amount of
$4,800,000, (b) pay bonuses to Borrower's employees in an aggregate amount not
to exceed $1,070,000, and (c) pay expenses of Borrower's recapitalization.
Subsequent to the initial disbursement of Term Loan proceeds, the proceeds of
the Term Loan shall be used by Borrower for general corporate purposes.
3.3 TERM NOTE. The Term Loan shall be evidenced by a promissory note
in the form attached hereto as EXHIBIT B (the "Term Note").
3.4 INTEREST RATES. Each time Borrower requests a Funding under the
Term Loan, at any time prior to the expiration of each Interest Period for any
IBOR Rate Borrowing, and at any other time with respect to Prime Rate
Borrowings, so long as there exists no Event of Default, Borrower may elect
either the Prime Borrowing Rate or the IBOR Borrowing Rate to apply to such
Funding, such existing IBOR Rate Borrowing at the end of the Interest Period, or
such existing Prime Rate Borrowing. In the event Borrower does not specify an
interest rate election as provided for herein for a requested Funding or prior
to the end of any Interest Period with respect to an existing IBOR Rate
Borrowing, then such Funding or existing IBOR Rate Borrowing at the expiration
of such Interest Period shall be deemed to constitute a Prime Rate Borrowing.
3.5 REPAYMENT.
(a) Commencing on the first day of the first month following the
initial Funding under the Term Loan and on the first day of each month
thereafter, Borrower shall pay U. S. Bank an amount equal to all accrued
interest on the Term Loan.
(b) Borrower shall make principal payments to U. S. Bank in an amount
necessary to reduce the outstanding principal balance of the Term Loan to the
amount of the Term Loan Commitment on each of the dates that the amount of the
Term Loan Commitment is reduced.
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(c) Borrower shall pay U. S. Bank all outstanding principal, accrued
interest, and other charges with respect to the Term Loan on December 31, 2002.
3.6 TERM LOAN FEES.
(a) Borrower shall pay U. S. Bank a nonrefundable fee for the Term
Loan in the amount of $90,000, $45,000 of which is payable on January 2, 1996,
and $45,000 of which is payable on June 30, 1996.
(b) Commencing on January 1, 1997, and on January 1 of each year
thereafter, Borrower shall pay U. S. Bank a nonrefundable commitment fee in an
amount equal to .125 percent of the amount of the Term Loan Commitment as of
each such date.
ARTICLE IV. GENERAL PROVISIONS APPLICABLE TO THE LOANS
4.1 FUNDINGS.
(a) Borrower shall give U. S. Bank irrevocable notice (either in
writing or orally and promptly confirmed in writing) for each Prime Rate
Borrowing and shall give U. S. Bank two Business Days prior written notice for
each IBOR Rate Borrowing (between 8 a.m. and 12 noon Seattle, Washington time).
Each such notice ("Borrowing Notice") shall be given by, and any written notice
or confirmation of an oral notice shall be signed by, Xxxxx Xxxxx or Xxxxxxxx
Xxxx, each of whom is authorized to request Fundings and direct disposition of
any such Fundings until written notice by Borrower of the revocation of such
authority is received by U. S. Bank. The Borrowing Notice shall specify (i) the
amount of the requested Funding, (ii) the interest option chosen by Borrower in
accordance with the provisions of this Agreement, (iii) for IBOR Rate
Borrowings, the Interest Period, and (iv) whether Borrower is requesting a new
Funding at the IBOR Borrowing Rate or conversion of any portion of the Prime
Rate Borrowing to an IBOR Rate Borrowing. Each Borrowing Notice shall be
effective upon receipt, except that notices received by U. S. Bank after
12 noon, Seattle time, on a Business Day shall be deemed to be received on the
immediately succeeding Business Day. Each Borrowing Notice shall be irrevocable
and shall be deemed to constitute a representation and warranty by Borrower
that, as of the date of the notice, (i) the statements set forth in ARTICLE VIII
herein are true and correct, (ii) no material adverse change in Borrower's
financial condition has occurred subsequent to November 22, 1995, and (iii) no
Event of Default has occurred and is continuing.
(b) Any such Funding shall be conclusively presumed to have been made
to or for the benefit of Borrower when made in accordance with such a request
and direction for disposition or when such Funding is deposited to the credit of
the account of Borrower with U. S. Bank or is transmitted to any other bank with
directions to credit the same to the account of Borrower at such bank,
regardless of whether persons other than those authorized hereunder to make
requests for Fundings have authority to draw against any such account.
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Borrower acknowledges that U. S. Bank cannot effectively determine whether a
particular request for a Funding is valid, authorized, or authentic. It is
nevertheless important to Borrower that it has the privilege of making requests
for Fundings in accordance with SECTION 4.1(A) herein. Therefore, to induce
U. S. Bank to lend funds in response to such requests and in consideration for
U. S. Bank's agreement to receive and consider such requests, Borrower assumes
all risk of the validity, authenticity, and authorization of such requests,
whether or not the individual making such requests has authority to request
Fundings and whether or not the aggregate sum owing exceeds the maximum
principal amount referred to above, except any risk relating to authorization
with respect to Persons other than the Persons identified in SECTION 4.1(A)
herein or other Persons subsequently authorized in writing to U. S. Bank to
request Fundings. U. S. Bank shall not be responsible under principles of
contract, tort, or otherwise for the amount of an unauthorized, except as to
authorization with respect to Persons other than the Persons identified in
SECTION 4.1(A) herein, or other Persons subsequently authorized in writing to
U. S. Bank, or invalid Funding; rather, Borrower agrees to repay any sums with
interest as provided herein.
4.2 MANNER OF PAYMENT. All sums payable to U. S. Bank pursuant to
this Agreement shall be paid directly to U. S. Bank in immediately available
United States funds. Whenever any payment to be made hereunder or on any of the
Notes becomes due and payable on a day that is not a Business Day, such payment
may be made on the next succeeding Business Day and such extension of time shall
in such case be included in computing interest on such payment.
4.3 STATEMENTS. U. S. Bank shall send Borrower statements of all
amounts due hereunder; the statements shall be considered prima facie evidence
unless Borrower notifies U. S. Bank to the contrary within 30 days of receipt of
any statement that Borrower claims to be incorrect. Borrower agrees that
accounting entries made by U. S. Bank with respect to Borrower's loan accounts
shall constitute prima facie evidence of all Fundings made under and payments
made on any of the Loans. Without limiting the methods by which U. S. Bank may
otherwise be entitled by Applicable Law to make demand for payment of the Loans
upon Borrower, Borrower agrees that any statement, invoice, or payment notice
from U. S. Bank to Borrower with respect to any principal or interest obligation
of Borrower to U. S. Bank shall be deemed to be a demand for payment in
accordance with the terms of such statement, invoice, or payment notice. Under
no circumstances shall a demand by U. S. Bank for partial payment of principal
or interest or both be construed as a waiver by U. S. Bank of its right
thereafter to demand and receive payment (in part or in full) of any remaining
principal or interest obligation.
4.4 BOOK ENTRY LOAN ACCOUNT. U. S. Bank shall establish a book entry
loan account for each of the Loans in which U. S. Bank will make debit entries
of all Fundings pursuant to the terms of this Agreement. U. S. Bank will also
record in the applicable loan account, in accordance with customary banking
practices, all interest and other charges, expenses, and other items properly
chargeable to Borrower, if any, together
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with all payments made by Borrower on account of the Indebtedness evidenced by
Borrower's respective loan accounts and all other sums credited to the
respective loan accounts. The debit balance of Borrower's respective loan
accounts shall reflect the amount of Borrower's Indebtedness to U. S. Bank from
time to time by reason of advances, charges, payments, or credits.
4.5 COMPUTATIONS OF INTEREST. All computations of interest shall be
based on a 360-day year for the actual number of days elapsed.
4.6 DEFAULT INTEREST. Upon the occurrence and during the continuance
of any Event of Default, U. S. Bank may, at its option, raise the interest rate
charged on the Loans to a rate of up to the Prime Rate plus 4.5 percent per
annum from the date of the occurrence of the Event of Default until the Event of
Default is cured or waived by U. S. Bank or, absent cure or waiver, until the
Loans are repaid in full.
4.7 MAXIMUM INTEREST RATE. Notwithstanding any provision contained
herein or in the Notes, the total liability of Borrower for payment of interest
pursuant hereto, including late charges, shall not exceed the maximum amount of
interest permitted by Applicable Law to be charged, collected, or received from
Borrower; and if any payments by Borrower include interest in excess of that
maximum amount, U. S. Bank shall apply the excess first to reduce the unpaid
balance of the Loans, then to reduce the balance of any other Indebtedness of
Borrower to U. S. Bank. If there is no such Indebtedness, the excess shall be
returned to Borrower.
4.8 LATE CHARGE. If any payment of principal or interest required
under any of the Loans is 15 days or more past due, Borrower will be charged a
late charge of 5 percent of the delinquent payment or $5, whichever is greater,
for each such late payment. The 15 day period provided for herein shall not be
construed as a waiver of any Default or Event of Default resulting from any late
payment under any of the Loans.
4.9 PREPAYMENTS. Borrower may prepay all or any portion of any Prime
Rate Borrowings without premium. In the event that Borrower prepays all or any
portion of any IBOR Rate Borrowing prior the expiration of the applicable
Interest Period, Borrower shall pay to U. S. Bank a yield maintenance premium in
an amount calculated pursuant to the formula attached hereto as EXHIBIT C. All
prepayments shall be applied to the Loans being prepaid in the inverse order of
maturity.
4.10 EXTENSIONS, RENEWALS, AND MODIFICATIONS. Any extensions,
renewals, and modifications of the Loans shall be governed by the terms and
conditions of this Agreement and the other Loan Documents unless otherwise
agreed to in writing by U. S. Bank and Borrower.
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4.11 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR ILLEGAL.
(a) U. S. Bank's obligation to maintain the IBOR Rate for the Loans
shall be suspended upon U. S. Bank's giving notice to Borrower that it shall be
against Applicable Law or impossible for U. S. Bank to maintain the IBOR Rate
for the Loans until U. S. Bank notifies Borrower that the circumstances giving
rise to the suspension no longer exist.
(b) After the date of this Agreement, if adoption of any Applicable
Law or any change therein or any change in the interpretation or administration
thereof by any Governmental Body, central bank, or comparable agency charged
with the interpretation or administration thereof, or if compliance by
U. S. Bank with any request or directive (whether or not having the force of
Applicable Law) of any such Governmental Body, central bank, or comparable
agency makes it against Applicable Law or impossible for U. S. Bank maintain the
Loans at the IBOR Rate, U. S. Bank shall immediately give notice thereof to
Borrower.
(c) Upon notice to Borrower provided for in SECTION 4.11(A) or (b)
herein, all IBOR Rate Borrowings shall automatically convert to Prime Rate
Borrowings.
(d) If U. S. Bank notifies Borrower that the circumstances giving
rise to the suspension of the IBOR Rate no longer apply, then the interest rate
elections set forth in this Agreement shall again be effective on the date
U. S. Bank provides such notice to Borrower.
4.12 INTEREST COST. If the revision of Regulation D announced by the
Board of Governors of the Federal Reserve Board, or if the adoption of any
Applicable Law or any change therein or any change in the interpretation or
administration thereof by any Governmental Body, central bank, or comparable
agency charged with the interpretation or administration thereof, or if
compliance by U. S. Bank with any request or directive (whether or not having
the force of Applicable Law) of any such Governmental Body, central bank, or
comparable agency:
(a) Shall subject U. S. Bank to any tax, duty, or other charge
resulting from all or any portion of the Loans bearing interest at the IBOR
Rate, or shall change the basis of taxation of payments to U. S. Bank of the
principal of or interest on the Loans, or any portion thereof, with interest
accruing at the IBOR Rate or any other amount due under this Agreement with
regard to the Loans with interest bearing at the IBOR Rate (except for changes
in the rate of tax on the overall net income of U. S. Bank imposed by the
jurisdiction in which U. S. Bank's principal executive office lies); or
(b) Shall impose or modify any reserve (including but not limited to
any reserve imposed by the Board of Governors of the Federal Reserve System),
special deposit, or similar requirement against assets of, deposits with, or for
the account of, or credit
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extended by U. S. Bank or shall impose on U. S. Bank any other condition
affecting the IBOR Rate Borrowings under the Loans;
and the result of any of the foregoing is to increase the cost to U. S. Bank of
maintaining the IBOR Rate Borrowings or to reduce the return of U. S. Bank under
this Agreement; then, from time to time, within ten days after demand by
U. S. Bank, Borrower shall pay to U. S. Bank such additional amount or amounts
as will compensate U. S. Bank for such increase in cost or reduction in return.
ARTICLE V. CONDITIONS PRECEDENT FOR FUNDINGS UNDER THE LOANS
5.1 CONDITIONS PRECEDENT FOR INITIAL FUNDING. U. S. Bank shall not
be required to make the initial Funding under either of the Loans unless or
until the following conditions have been fulfilled to the satisfaction of
U. S. Bank:
(a) U. S. Bank shall have received this Agreement, the Revolving
Note, and the Term Note, duly executed and delivered by the respective parties
thereto.
(b) U. S. Bank shall have received, duly executed and delivered by
Borrower, duplicate originals of a security agreement in the form attached
hereto as EXHIBIT D ("Security Agreement"), granting to U. S. Bank a first
priority and exclusive security interest in all of the personal property of
Borrower, whether tangible or intangible, now owned or hereafter acquired. One
of the originals of the Security Agreement shall be filed by U. S. Bank with the
United States Patent and Trademark Office.
(c) U. S. Bank shall have received, duly executed and delivered by
Borrower, such financing statements and other documents deemed necessary by
U. S. Bank to perfect the security interest granted to U. S. Bank.
(d) U. S. Bank shall have received the following documents related to
the Subordinated Debt, duly executed and delivered by each of the parties
thereto, in the form attached hereto as EXHIBIT E ("Subordination Documents"):
The Class A Subordinated Promissory Notes and the Class B Subordinated
Promissory Note referred to in the Stock and Note Purchase Agreement.
(e) U. S. Bank shall have received from counsel for Borrower, an
opinion addressed to U. S. Bank and dated as of the date of this Agreement, in
the form attached hereto as EXHIBIT F.
(f) U. S. Bank shall have received an independent appraisal of
Borrower, in form and substance satisfactory to U. S. Bank.
- 17 -
(g) No Default or Event of Default hereunder shall exist, and after
having given effect to the requested Funding, no Default or Event of Default
shall exist.
(h) All representations and warranties of Borrower contained herein
or otherwise made in writing in connection herewith shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of the initial Funding.
(i) All corporate proceedings of Borrower shall be satisfactory in
form and substance to U. S. Bank, and U. S. Bank shall have received all
information and copies of all documents, including records of all corporate
proceedings, that U. S. Bank has requested in connection therewith, such
documents where appropriate to be certified by proper corporate authorities or
Governmental Bodies. Borrower shall provide U. S. Bank with the following
documents prior to or upon the execution of this Agreement:
(i) Copies of the articles of incorporation of Borrower,
together with all amendments thereto, certified by Borrower to be true
and complete;
(ii) A certificate of authority for Borrower in the state
of Washington, dated within 30 days of the date of the execution of
this Agreement; and
(iii) A certified resolution of the directors of Borrower
and incumbency certificate in the form attached hereto as EXHIBIT G.
(j) U. S. Bank shall have received such evidence deemed necessary by
U. S. Bank that U. S. Bank's security interests in the Collateral constitute
first priority and exclusive security interests, except as otherwise provided
herein.
(k) U. S. Bank shall have received verification that it finds
acceptable of a $12,500,000 equity contribution to Borrower from the Investors.
(l) U. S. Bank shall have received, reviewed, and approved all
documents arising out of or related to the recapitalization of Borrower,
together with evidence satisfactory to U. S. Bank that concurrently with the
initial Funding under the Term Loan, such recapitalization shall have been
consummated.
(m) U. S. Bank shall have received, reviewed, and approved a
Collateral and financial status examination as performed by U. S. Bank's
internal audit staff.
(n) U. S. Bank shall have received a Borrowing Notice from Borrower
for the initial Fundings requested under the Loans.
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(o) U. S. Bank shall have received insurance certificates and lender
loss payable endorsements on casualty/property loss insurance in forms
satisfactory to U. S. Bank to the effect set forth in SECTION 6.5 hereof.
5.2 CONDITIONS PRECEDENT TO EACH SUBSEQUENT FUNDING. The obligation
of U. S. Bank to make any Funding subsequent to the initial Funding hereunder is
subject to the fulfillment, to the satisfaction of U. S. Bank, of the following:
(a) The conditions set forth in SECTION 5.1 shall have been
previously satisfied, and U. S. Bank shall have received evidence satisfactory
to U. S. Bank of satisfaction thereof;
(b) U. S. Bank shall have received a Borrowing Notice for each
requested Funding under the applicable Loan;
(c) There shall be executed and delivered to U. S. Bank such further
instruments, agreements, and documents, as may be reasonably necessary or proper
in the opinion of U. S. Bank to confirm the obligations of Borrower to
U. S. Bank hereunder, the grant of security therefor, and the proper use of the
proceeds of all Fundings;
(d) The representations and warranties of Borrower in ARTICLE VIII
herein shall be true on the date of each Funding with the same force and effect
as if made on and as of that date;
(e) No Default or Event of Default shall exist, and after having
given effect to the requested Funding, no Default or Event of Default shall
exist; and
(f) To the extent not previously delivered, all other documents,
agreements, and instruments from or with respect to Borrower or any other Person
that may be called for hereunder shall be duly executed and delivered to
U. S. Bank, including but not limited to all documents, agreements, and
instruments deemed necessary by U. S. Bank to perfect its security interest in
Collateral acquired after the date of this Agreement. For the purposes of this
Agreement, the waiver of delivery of any document, agreement, or instrument from
or with respect to Borrower or any other Person does not constitute a continuing
waiver with respect to the obligation to fulfill the conditions precedent to
each Funding hereunder.
ARTICLE VI. AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that so long as this Agreement is
in effect, and until the Loans, together with interest thereon, and all other
obligations incurred hereunder are paid or satisfied in full, Borrower shall:
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6.1 FINANCIAL DATA. Keep its books of account in accordance with
generally accepted accounting principles, consistently applied, and furnish to
U. S. Bank:
(a) As soon as practicable and in any event within 45 days after the
close of each fiscal quarter of Borrower, the following unaudited financial
statements of Borrower for each such quarter, all in reasonable detail and
certified by Borrower to be true and correct: balance sheet, statement of
income, and statement of cash flows. There shall be included in such financial
statements a calculation of the financial covenants provided for in ARTICLE VII
herein.
(b) As soon as practicable and in any event within 120 days after the
close of each fiscal year of Borrower, the following financial statements of
Borrower, setting forth the corresponding figures for the previous fiscal year
in comparative form where appropriate, all in reasonable detail and audited
(without any qualification or exception deemed material by U. S. Bank) by
Borrower's current independent certified public accountant or such other
independent certified public accountants selected by Borrower and satisfactory
to U. S. Bank: balance sheet, statement of income, and statement of cash flows.
Borrower shall provide U. S. Bank with a copy of its independent certified
public accountants' management letter or other similar report or correspondence
to Borrower.
(c) As soon as practicable and in any event within 45 days after the
close of each fiscal quarter of Borrower, certificates signed by Borrower,
stating that during such period no Default or Event of Default existed or if any
such Default or Event of Default existed, specifying the nature thereof, the
period of existence thereof, and what action Borrower proposes to take or has
taken with respect thereto, and that during such period Borrower was in
compliance with all of the financial covenants set forth in ARTICLE VII herein;
and promptly upon the occurrence of any Default or Event of Default, a
certificate signed by Borrower, specifying the nature thereof, the period of
existence thereof, and what action Borrower proposes to take or has taken with
respect thereto.
(d) As soon as practicable and in any event within 30 days after the
close of each calendar month on the last day of which there were any amounts
outstanding under the Revolving Loan, accounts receivable and accounts payable
agings for each such month in a form and in such detail as is acceptable to
U. S. Bank.
(e) As soon as practicable and in any event within 90 days after the
beginning of each fiscal year of Borrower, a statement projecting all capital
expenditures to be made or committed to during such fiscal year with respect to
Borrower.
(f) As soon as practicable and in any event within 90 days after the
beginning of each fiscal year, a projection of the financial operations of
Borrower in a form and in such detail as is acceptable to U. S. Bank.
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(g) With reasonable promptness, such other information regarding the
business, operations, and financial condition of Borrower as U. S. Bank may from
time to time reasonably request.
6.2 LICENSES AND PERMITS. Maintain all Governmental Approvals and
all related or other material agreements necessary for Borrower to operate its
business, as it now exists or as it may be modified or expanded. Borrower will
at all times comply with all Applicable Laws relating to the operations,
facilities, or activities of Borrower.
6.3 MAINTENANCE OF PROPERTIES. Keep Borrower's properties in good
repair and in good working order and condition, in a manner consistent with past
practices and comparable to industry standards; from time to time make all
appropriate and proper repairs, renewals, replacements, additions, and
improvements thereto; and keep all equipment that may now or in the future be
subject to compliance with any Applicable Laws in material compliance with such
Applicable Laws.
6.4 PAYMENT OF CHARGES. Duly pay and discharge all material
(a) taxes, assessments, levies, and any other charges of Governmental Bodies
imposed on or against Borrower or its property or assets, or upon any property
leased by Borrower, prior to the date on which penalties attached thereto,
unless and to the extent only that such taxes, assessments, levies, and any
other charges of Governmental Bodies, after written notice thereof having been
given to U. S. Bank, are being contested in good faith and by appropriate
proceedings, (b) claims allowed by Applicable Laws, whether for labor,
materials, rentals, or anything else, which could, if unpaid, become a lien or
charge upon Borrower's property or assets or the outstanding capital stock of
Borrower or adversely affect the facilities or operations of Borrower, (unless
and to the extent only that the validity thereof is being contested in good
faith and by appropriate proceedings after written notice thereof has been given
to U. S. Bank); (c) trade bills in accordance with the terms thereof or
generally prevailing industry standards; and (d) other Indebtedness heretofore
or hereafter incurred or assumed by Borrower, unless such Indebtedness be
renewed or extended, or unless after written notice thereof has been given to
U. S. Bank, Borrower's obligation to pay such Indebtedness is being contested in
good faith and by appropriate proceedings. In the event any charge is being
contested by Borrower as allowed above, Borrower shall establish adequate
reserves against possible liability therefor.
6.5 INSURANCE.
(a) Maintain insurance upon Borrower's properties and business
against such risks and in such amounts as is customary in Borrower's business.
Borrower shall cause each insurance policy issued in connection therewith to
provide and shall cause the insurer issuing such policy to certify to U. S. Bank
that (i) if such insurance is proposed to be canceled or materially changed for
any reason whatsoever, such insurer will promptly notify U. S. Bank, and such
cancellation or change shall not be effective as to U. S. Bank for 30 days after
receipt by U. S. Bank of such notice, unless the effect of the change is to
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extend or increase coverage under the policy; (ii) U. S. Bank will have the
right at its election to remedy any default in the payment of premiums within
30 days of notice from the insurer of the default; and (iii) loss payments from
casualty/property loss insurance in excess of $50,000 in each instance will be
payable jointly to the Borrower and U. S. Bank as secured party or otherwise as
its interest may appear.
(b) From time to time upon request by U. S. Bank, promptly furnish or
cause to be furnished to U. S. Bank evidence, in form and substance satisfactory
to U. S. Bank, of the maintenance of all insurance, indemnities, or bonds
required by this SECTION 6.5 or by any license, lease, or other agreement to be
maintained, including but not limited to such originals or copies as U. S. Bank
may request of policies, certificates of insurance, riders, assignments, and
endorsements relating to the insurance and proof of premium payments.
6.6 MAINTENANCE OF RECORDS. Keep at all times books of account and
other records in which full, true, and correct entries will be made of all
dealings or transactions in relation to the business and affairs of Borrower.
6.7 INSPECTION. Allow any representative of U. S. Bank to visit and
inspect any of the properties of Borrower, to examine the books of account and
other records and files of Borrower, to make copies thereof, and to discuss the
affairs, business, finances, and accounts of Borrower with its officers,
employees, and accountants, all at such reasonable times and as often as
U. S. Bank may desire in its reasonable discretion. This right of inspection
shall specifically include U. S. Bank's collateral and financial examinations.
6.8 HAZARDOUS SUBSTANCES.
(a) Borrower hereby covenants and agrees that so long as any
Indebtedness of Borrower to U. S. Bank is outstanding:
(i) Borrower will not permit its property or any portion
thereof to be a site for the storage, use, generation, manufacture,
disposal or transportation of Hazardous Materials, except for
merchandise, cleaning supplies, and other similar materials sold,
used, stored, or otherwise handled n in the ordinary course of
Borrower's existing business in compliance with all Hazardous
Materials Laws;
(ii) Borrower will not permit any Hazardous Materials to be
disposed of off its property other than in properly licensed disposal
sites;
(iii) Borrower, at Borrower's sole cost and expense (as
between Borrower and U. S. Bank), will keep and maintain its property
and each portion thereof in compliance with and shall not cause or
permit its
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property or any portion thereof to be in violation of any Hazardous
Materials Laws; and
(iv) Borrower will immediately advise U. S. Bank in writing
of any Hazardous Material Claim.
(b) Borrower agrees to indemnify U. S. Bank and hold U. S. Bank
harmless from and against any and all claims, demands, damages, losses, liens,
liabilities, penalties, fines, lawsuits, and other proceedings and costs and
expenses (including attorney fees), arising directly or indirectly from or out
of or in any way connected with (i) the accuracy of the representations
contained in SECTION 8.17 herein; (ii) any activities on its property during
Borrower's ownership, possession, or control of its property which directly or
indirectly results in its property or any other property becoming contaminated
with Hazardous Materials; (iii) the discovery of Hazardous Materials on its
property; (iv) the cleanup of Hazardous Materials from its property; and (v) the
discovery of Hazardous Materials or the cleanup of Hazardous Materials from
adjacent or other property that has become contaminated as a result of any
activity on Borrower's property. As between Borrower and U. S. Bank, Borrower
acknowledges that it will be solely responsible for all costs and expenses
relating to the cleanup of Hazardous Materials from its property or from any
other properties that become contaminated with Hazardous Materials as a result
of activities on or the contamination of its property. Nothing contained in
this SECTION 6.8(B) shall require Borrower to indemnify and hold U. S. Bank
harmless from any damages, losses, or liability arising from any activities of
U. S. Bank or any other Person (other than any Borrower or Affiliate) after
U. S. Bank or any other Person (other than any Borrower or Affiliate) acquires
title to the property in question pursuant to a foreclosure, deed in lieu of
foreclosure, or similar transaction and has actual possession of such property.
(c) Borrower's obligations under this SECTION 6.8 are unconditional
and shall not be limited by any nonrecourse or other limitations of liability
provided for in the Loan Documents. The representations, warranties, and
covenants of Borrower set forth in this SECTION 6.8 and SECTION 8.17 herein
(including but not limited to the indemnity provided for in SECTION 6.8(b)
above) shall survive the closing and repayment of the Loans to U. S. Bank;
and, to the extent permitted by Applicable Laws and Hazardous Materials Laws,
shall survive the transfer of its property by foreclosure proceedings (whether
judicial or nonjudicial), deed in lieu of foreclosure, or otherwise. Borrower
acknowledges and agrees that its covenants and obligations hereunder are
separate and distinct from its obligations under the Loans and the Loan
Documents.
6.9 CORPORATE EXISTENCE. Maintain and preserve the corporate
existence of Borrower.
6.10 NOTICE OF DISPUTES AND OTHER MATTERS. Promptly give written
notice to U. S. Bank of:
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(a) Any citation, order to show cause, or other legal process or
order that could have a material adverse effect on Borrower, directing Borrower
to become a party to or to appear at any proceeding or hearing by or before any
Governmental Body that has granted to Borrower any Governmental Approval, and
include with such notice a copy of any such citation, order to show cause, or
other legal process or order;
(b) Any (i) refusal, denial, threatened denial, or failure by any
Governmental Body to grant, issue, renew, or extend any material Governmental
Approval; (ii) proposed or actual revocation, termination, or modification
(whether favorable or adverse) of any Governmental Approval by any Governmental
Body; (iii) dispute or other action with regard to any Governmental Approval by
any Governmental Body; (iv) notice from any Governmental Body of the imposition
of any material fines or penalties or forfeitures; or (v) threats or notice with
respect to any of the foregoing or with respect to any proceeding or hearing
that might result in any of the foregoing;
(c) Any dispute concerning or any material threatened nonrenewal or
material modification of any material lease for real or personal property to
which Borrower is a party; or
(d) Any actions, proceedings, or claims of which Borrower may have
notice that may be commenced or asserted against Borrower in which the amount
involved is $50,000 or more and is not fully covered by insurance or which, if
not solely a claim for monetary damages, could, if adversely determined, have a
material adverse effect on Borrower.
6.11 EXCHANGE OF NOTE. Upon receipt of a written notice of loss,
theft, destruction, or mutilation of a Note, and upon surrendering such Note for
cancellation if mutilated, execute and deliver a new Note or a Note of like
tenor in lieu of such lost, stolen, destroyed, or mutilated Note. Any Note
issued pursuant to this SECTION 6.11 shall be dated so that neither gain nor
loss of interest shall result therefrom. U. S. Bank agrees to indemnify
Borrower if any third party makes a claim under such lost, stolen, destroyed, or
mutilated Note that has been replaced.
6.12 MAINTENANCE OF LIENS. At all times maintain the liens and
security interests provided under or pursuant to this Agreement as valid and
perfected first liens and security interests on the property and assets intended
to be covered thereby. Except as contemplated under SECTION 7.5, Borrower shall
take all action requested by U. S. Bank necessary to assure that U. S. Bank has
valid and exclusive liens and security interests in all Collateral.
6.13 OTHER AGREEMENTS. Subject to any applicable notice and cure
period, comply with all covenants and agreements set forth in or required
pursuant to any of the other Loan Documents.
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6.14 AFTER-ACQUIRED COLLATERAL. Upon request by U. S. Bank, execute
and deliver to U. S. Bank appropriate instruments in order to effectuate the
proper granting and perfection of a first priority security interest in or
assignment of all property to U. S. Bank, whether personal, real, or mixed,
hereafter acquired by Borrower, concurrently with the acquisition thereof.
Within 45 days of the end of each fiscal quarter of Borrower, Borrower shall
deliver to U. S. Bank an updated schedule of Borrower's patents, trademarks, and
trade names if there has been any change in the status of Borrower's patents,
trademarks, or trade names since the date of the previous schedule delivered to
U. S. Bank.
6.15 FURTHER ASSURANCES. Within ten days of request by U. S. Bank,
duly execute and deliver or cause to be duly executed and delivered to
U. S. Bank such further instruments, agreements, and documents and do or cause
to be done such further acts as may be necessary or proper in the opinion of
U. S. Bank to carry out more effectively the provisions and purpose of this
Agreement and the other Loan Documents.
6.16 MAINTENANCE OF BANK ACCOUNTS. As security for repayment of the
Loans, maintain its principal depository accounts with U. S. Bank. Borrower
hereby grants to U. S. Bank a security interest in all such accounts in order to
secure the obligations of Borrower hereunder.
ARTICLE VII. NEGATIVE COVENANTS
Borrower covenants and agrees that until all the Loans, together with
interest thereon, and all other obligations incurred hereunder are paid or
satisfied in full, Borrower shall not, without the prior written consent of
U. S. Bank:
7.1 DIVIDENDS AND DISTRIBUTIONS. Declare or pay any cash
distributions or dividends or return any capital to any of Borrower's
shareholders (with the exception of any such transaction that occurs
substantially simultaneously with the Funding under the Loans); authorize or
make any distribution, payment, or delivery of property or cash to any of
Borrower's shareholders (with the exception of any such transaction that occurs
substantially simultaneously with the Funding under the Loans); redeem, retire,
purchase, or otherwise acquire, directly or indirectly, for consideration, any
shares or other interests of Borrower now or hereafter outstanding (with the
exception of any such transaction that occurs substantially simultaneously with
the Funding under the Loans); pay any Subordinated Debt; or set aside any funds
for any of the foregoing purposes except that Borrower shall be allowed to (a)
make interest payments on the Subordinated Debt in accordance with the
Subordination Documents unless a Default or Event of Default exists, or unless
giving effect to the proposed payment would give rise to a Default or an Event
of Default, (b) pay dividends to its shareholders after U. S. Bank has received
Borrower's audited financial statements for Borrower's fiscal year ending
December 31, 1996, unless a Default or Event of Default exists, or unless giving
effect to the proposed payment would give rise to a Default or an Event of
Default.
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7.2 TRANSACTIONS WITH AFFILIATES. Except for the redemption of
certain shares of Borrower's stock from Britannia substantially simultaneously
with the initial Funding of the Loans, and the possible conversion of the
series A preferred stock into common stock as contemplated under Borrower's
restated articles of incorporation, enter into any transaction, other than an
arm's length transaction, in which an Affiliate of Borrower shall have any
interest; or make any payment or agree to make any payment to any such
Affiliate; or transfer or agree to transfer ownership or possession of any of
its business or assets, tangible or intangible, real, personal, or mixed, to any
Affiliate.
7.3 OTHER INDEBTEDNESS. Create, incur, assume, or suffer to exist,
contingently or otherwise, any Indebtedness except (a) Indebtedness represented
by the Notes; (b) accounts and other current payables arising from the ordinary
course of business; (c) the Subordinated Debt; and (d) additional Indebtedness
outstanding or committed to at any time (including but not limited to
indebtedness evidenced by notes, bonds, debentures, capitalized leases, purchase
agreements, and other contractual obligations) not in excess of an aggregate
amount at any one time outstanding of $500,000. The Indebtedness described in
clauses (a), (b), (c), and (d) hereof is collectively called. Notwithstanding
clause (d) above, Borrower may not guarantee or become contingently liable for
the obligation of any Person except as provided for herein. In computing the
additional indebtedness permitted by clause (d) hereof, all capital lease
payments due from Borrower within 12 months shall be included if the amounts of
such lease payments are not otherwise included as Indebtedness in accordance
with generally accepted accounting principles. Except as set forth in
SECTION 7.5 herein, none of the additional indebtedness permitted by this
SECTION 7.3 shall be secured by all or any portion of the Collateral.
7.4 LEASES AND LEASEBACKS. Except for arrangements entered into
prior to the date hereof and except for leases of computer hardware for testing
purposes not to exceed an aggregate amount of $100,000 in any fiscal year, enter
into any new agreement to rent or lease any material real or personal property
or enter into any arrangement with any bank, insurance company, or other lender
or investor providing for the leasing of any real or personal property or
equipment (a) that at the time has been or is sold or transferred by Borrower to
such lender or investor or (b) that has been or is being acquired from another
Person by such lender or investor or on which one or more buildings have been or
are to be constructed by such lender or investor, for the purpose of leasing
such property to Borrower. Borrower may, however, enter into such leases in the
ordinary course of business provided that there is compliance with
SECTION 7.3(D) hereof.
7.5 LIENS. Contract, create, incur, assume, or suffer to exist any
mortgage, pledge, lien, or other charge or encumbrance of any kind (including
but not limited to the charge upon property purchased under conditional sales or
other title retention agreements) upon or grant any interest in any of its
property or assets whether now owned or hereafter acquired, except (a) liens
granted pursuant to this Agreement; (b) liens in connection with worker's
compensation, unemployment insurance, or other social security obligations;
(c) good faith deposits in connection with bids, tenders, contracts, or
leases or
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deposits to secure public statutory obligations; (d) mechanic's, carrier's,
repairmen's, or other like liens in the ordinary course of business with respect
to obligations that are not overdue or that are being contested in good faith
and for which appropriate reserves have been established or for which deposits
to obtain the release of such liens have been made; (e) liens for taxes,
assessments, levies, or charges of Governmental Bodies imposed upon Borrower or
its property, operations, income, products, or profits that are not at the time
due or payable or for which, if the validity thereof is being contested in good
faith by legal or administrative proceedings, appropriate reserves have been
established; (f) encumbrances consisting of zoning regulations, easements,
rights-of-way, survey exceptions, and other similar restrictions on the use of
real property or minor irregularities in title thereto that do not materially
impair the use of such property in the operation of the business of Borrower;
(g) liens arising out of judgments or awards with regard to which Borrower shall
be prosecuting an appeal in good faith and for which a stay of execution has
been issued and appropriate reserves established; and (h) the currently existing
liens listed on EXHIBIT H hereto. The liens described in clauses (a) through
(h) herein are called the "Permitted Liens."
7.6 ADVANCES AND LOANS. Lend money, make credit available (other
than in the ordinary course of business to customers), or lend property or the
use thereof to any Person; purchase or repurchase the stock or Indebtedness or
all or a substantial part of the assets or properties of any Person (with the
exception of any such transaction to occur substantially simultaneously with the
Funding under the Loans); guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly or by any instrument having the effect
of assuring any Person's payment, performance, or capability) the Indebtedness,
performance, obligations, stock, or dividends of any Person; or agree to do any
of the foregoing; but Borrower may endorse negotiable instruments for deposit or
collection in the ordinary course of business.
7.7 INVESTMENTS. Invest in (by capital contribution or otherwise),
acquire, purchase, or make any commitment to purchase the obligations, stock, or
equity of any Person except (a) direct obligations of the government of the
United States of America or any agency or instrumentality thereof,
(b) interest-bearing certificates of deposit or repurchase agreements issued by
any commercial banking institution satisfactory to U. S. Bank, (c) stock or
obligations issued in settlement of claims of Borrower against others by reason
of bankruptcy or a composition or readjustment of debt or reorganization of any
debtor of Borrower.
7.8 CONSOLIDATION, MERGER, AND SALE OF ASSETS. Wind up, liquidate,
or dissolve Borrower's affairs or enter into any transaction of merger or
consolidation with any Person; convey, sell, lease, or otherwise dispose of (or
agree to do any of the foregoing at any time) any of its material licenses,
contracts, or permits; sell all or a substantial part of its property or assets
or sell any part of its property or assets necessary or desirable for the
conduct of its business as now generally conducted or as proposed to be
conducted, except the sale of inventory in the ordinary course of Borrower's
business; sell any of its notes
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receivable, installment or conditional sales agreements, or accounts receivable;
purchase, lease, or otherwise acquire all or a substantial part of the property
or assets of any other Person.
7.9 SUBSIDIARIES. Form or acquire any Person or any portion thereof.
7.10 TYPE OF BUSINESS. Enter into any business which is substantially
different from or not connected with the business in which Borrower is presently
engaged or make any substantial change in the nature of its business or
operations.
7.11 CHANGE OF CHIEF EXECUTIVE OFFICE OR NAME. Change (a) the chief
executive office of Borrower, (b) Borrower's name, or (c) the location of any of
the Collateral, provided, however, that Borrower may move Collateral to other
locations within the state of Washington and may sell inventory in the ordinary
course of its business; or adopt or use any trade name other than those set
forth in SECTION 8.16 herein without (x) prior written notice to U. S. Bank and
(y) the execution, delivery, and filing (and payment of filing fees and taxes)
of all such documents as may be necessary or advisable in the opinion of
U. S. Bank to continue to perfect and protect the liens and security interests
in the Collateral.
7.12 CHANGE IN DOCUMENTS. Amend, supplement, terminate, or otherwise
modify in any way Borrower's restated articles of incorporation as they exist as
of the date of this Agreement or the Subordination Documents.
7.13 CONTROL. Except as provided in the Stock and Note Purchase
Agreement, enter into any agreement (other than employment agreements) with any
Person that confers upon such Person the right or authority to control or direct
a major portion of the business or assets of Borrower.
7.14 PENSION PLAN. Terminate or partially terminate any Plan now
existing or hereafter established for Borrower or its Affiliates or withdraw
from participation therein under circumstances that result or could result in
liability to the Pension Benefit Guaranty Corporation, to the fund by which the
Plan is funded, or to the employees (or their beneficiaries) for whom the Plan
is or shall be maintained; or permit any other event or circumstance to occur
that results or could result in liability to the Pension Benefit Guaranty
Corporation or a violation of ERISA that would result in substantial liability
to the Pension Benefit Guaranty Corporation or the U.S. Department of Labor.
EX99 DEBT SERVICE COVERAGE. Permit the Debt Service Coverage Ratio to
be less than 1.2:1.00 as of the end of any fiscal quarter of Borrower,
calculated on a trailing four-quarter basis.
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7.16 FUNDED DEBT COVERAGE RATIO. Permit the Funded Debt Coverage
Ratio to be greater than 1.0:1.0 as of the end of any fiscal quarter of Borrower
commencing with the fiscal quarter ending December 31, 1996, calculated on a
trailing four-quarter basis.
7.17 WORKING CAPITAL. Permit the Working Capital to be less than
$4,500,000 as of the end of any fiscal quarter of Borrower.
7.18 LIMITATION ON CAPITAL EXPENDITURES. Permit the total amount of
Capital Expenditures to exceed $400,000 in any fiscal year of Borrower.
7.19 SUBORDINATED DEBT. Permit the outstanding principal amount of
Subordinated Debt to be less than $20,000,000 at any time.
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES
In order to induce U. S. Bank to enter into this Agreement and to make
the Loans as herein provided, Borrower hereby makes the following
representations, covenants, and warranties, all of which shall survive the
execution and delivery of this Agreement and shall not be affected or waived by
any inspection or examination made by or on behalf of U. S. Bank:
8.1 CORPORATE STATUS. Borrower is a corporation organized and
validly existing under the laws of the state of Washington. Borrower has the
power and authority to own its property and assets and to transact the business
in which it is engaged or presently proposes to engage. Borrower is qualified
to do business in all states except where the failure to be qualified could not
have a material adverse effect on Borrower.
8.2 POWER AND AUTHORITY. Borrower has the power to execute, deliver,
and carry out the terms and provisions of this Agreement and each of the Loan
Documents and has taken all necessary action to authorize the execution,
delivery, and performance of this Agreement and the other Loan Documents, the
borrowings hereunder, and the making and delivery of the Notes and all Loan
Documents delivered hereunder. This Agreement constitutes and the Notes and
other Loan Documents and instruments issued or to be issued hereunder, when
executed and delivered pursuant hereto, constitute or will constitute the
authorized, valid, and legally binding obligations of Borrower enforceable in
accordance with their respective terms, except to the extent that any of the
Collateral is subject to a lease or a security interest that requires notice to
or the consent of the lessor or secured party, as the case may be, and except
contracts with the General Services Administration that require notice to or the
consent of the General Services Administration to the granting of a security
interest in such Collateral and such notice is not given or such consent is not
obtained, or that prohibits the granting of a security interest.
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8.3 NO VIOLATION OF AGREEMENTS. Except for matters described in the
Disclosure Schedule and in SECTION 8.2 herein, Borrower is not in default under
any material provision of any agreement to which it is a party or in violation
of any material provision of any Applicable Laws. The execution and delivery of
this Agreement, the Notes, the other Loan Documents, and the instruments
incidental hereto; the consummation of the transactions herein or therein
contemplated; and compliance with the terms and provisions hereof or thereof
(a) will not violate any material provision of any Applicable Law and (b) will
not conflict or be inconsistent with; result in any breach of any of the
material terms, covenants, conditions, or provisions of; constitute a default
under; or result in the creation or imposition of (or the obligation to impose)
any lien, charge, or encumbrance upon any of the property or assets of Borrower
pursuant to the terms of: any material Governmental Approval, mortgage, deed of
trust, lease, agreement, or other instrument to which Borrower is a party, by
which Borrower may be bound, or to which Borrower may be subject, and (c) will
not violate any of the provisions of the articles of incorporation of Borrower.
Notwithstanding the foregoing, U. S. Bank acknowledges that Borrower's contracts
with the General Services Administration and certain equipment leases entered
into by Borrower prior to the date of this Agreement may require notice or
consent prior to Borrower granting U. S. Bank a security interest therein, and
U. S. Bank also acknowledges that Borrower has not given such notices nor
obtained any such consents. Except for any of Borrower's contracts with the
General Services Administration with respect to which notice or consent is
required for the granting of a security interest, no Governmental Approval is
necessary (x) for the execution of this Agreement, the making of the Notes, or
the assumption and performance of this Agreement or the Notes by Borrower or
(y) for the consummation by Borrower of the transactions contemplated by this
Agreement including but not limited to the grant of the security interests to
U. S. Bank.
8.4 RECORDING AND ENFORCEABILITY. Neither the articles of
incorporation, bylaws, or other applicable corporate documents of Borrower nor
other agreements require recording, filing, registration, notice, or other
similar action in order to insure the legality, validity, binding effect, or
enforceability against all Persons of this Agreement, the Notes, or other Loan
Documents executed or to be executed hereunder, other than filings or recordings
that may be required under the Uniform Commercial Code or in connection with the
perfection of the security interests of U. S. Bank in patents, trademarks, and
similar types of Collateral.
8.5 LITIGATION. There are no actions, suits, or proceedings pending
or threatened against or affecting Borrower before any Governmental Body that
could have a material adverse effect on Borrower or the Collateral. Borrower is
not in default under any material provision of any Applicable Law or
Governmental Approval of any Governmental Body which could have a material
adverse effect on Borrower or on the Collateral.
8.6 GOOD TITLE TO PROPERTIES. Borrower has good and marketable title
to, or a valid leasehold interest in, its property and assets, subject to no
liens, mortgages,
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pledges, encumbrances, or charges of any kind, except those permitted under the
provisions of SECTION 7.5 of this Agreement.
8.7 LICENSES AND PERMITS. All Governmental Approvals with respect to
the business of Borrower were to Borrower's knowledge duly and validly issued by
the respective Governmental Bodies, are in full force and effect, and are to
Borrower's knowledge valid and enforceable in accordance with their terms. With
regard to such Governmental Approvals, no fact or circumstance exists that
constitutes or, with the passage of time or the giving of notice or both, would
constitute a material default under any thereof, or permit the grantor thereof
to cancel or terminate the rights thereunder, except upon the expiration of the
full term thereof. Borrower presently holds all material Governmental Approvals
as are necessary or advisable in connection with the conduct of its business as
now conducted and as presently proposed to be conducted.
8.8 PROPERTIES IN GOOD CONDITION. All the material properties of
Borrower are, and all material properties to be added in connection with any
contemplated expansion will be in good repair and good working order and
condition (ordinary wear and tear excepted) in a manner consistent with past
practices of Borrower, and comparable to industry standards and are and will be
in material compliance with all Applicable Laws.
8.9 FINANCIAL STATEMENTS. The (a) reviewed financial statements of
Borrower dated December 31, 1994, and all schedules and notes included in such
financial statements and (b) unaudited financial statements of Borrower that
have heretofore been delivered to U. S. Bank are true and correct in all
material respects and present fairly (i) the financial position of Borrower as
of the date of said statements and (ii) the results of operations of Borrower
for the periods covered thereby; and there are not any significant liabilities
that should have been reflected in the financial statements or the notes thereto
under generally accepted accounting principles, contingent or otherwise,
including liabilities for taxes or any unusual forward or long-term commitments,
that are not disclosed or reserved against in the statements referred to above
or in the notes thereto or that are not disclosed herein. All such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied. There has been no material adverse change
(including but not limited to any such change occasioned by accident, act of
God, war, fire, flood, explosion, strike or other labor dispute, or orders or
action by any Governmental Body or public utility) in the operations, business,
property, assets, or condition (financial or otherwise) of Borrower since
December 31, 1994.
8.10 OUTSTANDING INDEBTEDNESS. Other than current trade payables,
current obligations under real and personal property leases, the Notes, the
Subordinated Debt, and Indebtedness of Borrower to be repaid substantially
simultaneously with the initial Funding under the Loans (including cash and
stock bonuses to be paid to Xxxxx Xxxxx, as well as costs and fees incurred by
Borrower prior to December 31, 1995), Borrower has no Indebtedness, including
but not limited to Indebtedness to Affiliates, that is not listed on Borrower's
unaudited financial statements dated November 22, 1995.
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8.11 TAXES. Except as set forth in the Disclosure Schedule, Borrower
has duly filed all tax returns and reports required by Applicable Law to be
filed; and all taxes, assessments, levies, fees, and other charges of
Governmental Bodies upon Borrower or upon its assets that are due and payable
have been paid (except as otherwise permitted in this Agreement).
8.12 LICENSE FEES. Borrower has paid all fees and charges that have
become due for any Governmental Approval for its business or has made adequate
provisions for any such fees and charges that have accrued.
8.13 TRADEMARKS, PATENTS, ETC. Attached hereto as EXHIBIT I is a
schedule of all trademarks, trade names, service marks, patents, and
applications therefor currently held by Borrower or in which it has an interest,
e.g., a license. Borrower possesses all necessary trademarks, trade names,
service marks, copyrights, patents, patent rights, and licenses to conduct its
businesses as now and as proposed to be conducted, without conflict with the
rights or claimed rights of others.
8.14 DISCLOSURE. To the best of Borrower's knowledge, the exhibits
hereto, the financial information and statements referred to in SECTION 8.9
herein, any certificate, statement, report or other document furnished to
U. S. Bank by Borrower or any other Person in connection herewith or in
connection with any transaction contemplated hereby, and this Agreement, do not
contain any untrue statements of material fact or omit to state any material
fact necessary in order to make the statements contained therein or herein not
misleading.
8.15 REGULATIONS U AND X. Borrower does not own and no part of the
proceeds hereof will be used to purchase or carry any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or carrying any
margin stock. Borrower is not engaged principally or as one of its important
activities in the business of extending credit for the purpose of purchasing or
carrying any margin stock. If requested by U. S. Bank, Borrower will furnish to
U. S. Bank a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in said Regulation. No part of the proceeds of the Loans
will be used for any purpose that violates or is inconsistent with the
provisions of Regulation X of said Board of Governors.
8.16 NAMES. Neither Borrower nor any of its predecessors operate or
do business or during the past five years have operated or done business under a
fictitious, trade, or assumed name other than: Apex PC Solutions and Apex
Computer Company.
8.17 CONDITION OF PROPERTY. Except as otherwise disclosed to
U. S. Bank, Borrower hereby represents and warrants to U. S. Bank that as of the
date hereof and continuing hereafter, Borrower's property (both owned and
leased) and each portion thereof (a) are not and to the best knowledge of
Borrower after due investigation have not been a site
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for the use, generation, manufacture, storage, disposal, or transportation of
any Hazardous Material; (b) are presently in compliance with all Hazardous
Materials Laws; and (c) are not being used and to the best knowledge of Borrower
after due investigation have not been used in any manner that has resulted in or
will result in Hazardous Materials being spilled or disposed of on any adjacent
or other property.
8.18 PENSION PLANS. No "reportable event" as defined in
Section 4043(b) of Title IV of ERISA has occurred and is continuing with respect
to any plan maintained for employees of Borrower or any Affiliate. In addition,
each of the plans maintained for the employees of Borrower and its Affiliates
are in compliance with the requirements of ERISA, including the minimum funding
requirements.
ARTICLE IX. EVENTS OF DEFAULT; REMEDIES
9.1 EVENTS OF DEFAULT. "Event of Default," wherever used herein,
means any one of the following events (whatever the reason for the Event of
Default, whether it shall relate to one or more of the parties hereto, and
whether it shall be voluntary or involuntary or be pursuant to or affected by
operation of Applicable Law):
(a) If Borrower fails to pay the principal of or any installment of
interest on either of the Notes, within five days of the date the same becomes
due and payable, whether at scheduled maturity, by acceleration, or otherwise;
or
(b) If any Indebtedness of Borrower in excess of $50,000 for money
borrowed or credit extended (including,without limitation, the Subordinated
Debt) becomes or is declared due and payable (after any applicable grace period)
prior to the stated maturity thereof or is not paid as and when it becomes due
and payable, or if any event occurs that constitutes an event of default (after
any applicable grace period) under any instrument, agreement, or evidence of
Indebtedness relating to any such obligation of Borrower that would allow the
holder of such Indebtedness to demand payment thereof; or
(c) If Borrower fails to pay or perform (after any applicable grace
period) any obligation or Indebtedness to others in excess of $50,000 (other
than as set forth in SECTION 9.1(B) herein), whether now or hereafter incurred;
or
(d) If any representation or warranty (i) made by Borrower in this
Agreement or (ii) made by Borrower or any other Person in any document,
certificate, or statement furnished pursuant to this Agreement or in connection
herewith, is false or misleading in any material respect; or
(e) If Borrower fails to observe or perform any term, covenant, or
agreement to be performed or observed pursuant to ARTICLE VI and VII herein and
Borrower fails to cure the same within the following-described cure periods:
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(i) If Borrower fails to observe or perform any term, covenant,
or agreement to be performed or observed pursuant to ARTICLE VI or VII
herein and Borrower fails to cure the same within the following-described
cure periods:
(ii) No cure period: SECTIONS 6.5, 6.9, 6.16, 7.8, 7.9, 7.10,
7.12, 7.13, 7.15, 7.16, 7.17, 7.18, and 7.19;
(iii) Within five days after the occurrence, without notice:
SECTIONS 6.1, 6.12, 6.14, 7.3, 7.4, 7.5, 7.6, 7.7, and 7.11;
(iv) Within five days after written notice from U. S. Bank:
SECTIONS 6.7, 6.11, 6.15, and 7.1;
(v) Within 30 days after the occurrence, without notice:
SECTIONS 6.2, 6.3, 6.4, 6.6, 6.8, 6.10, 7.2, and 7.14; and
(vi) As specified in the Loan Documents referred to in
SECTION 6.13; or
(f) If Borrower fails to observe or perform (not otherwise specified
in this ARTICLE IX) any term, covenant, or agreement to be performed or observed
pursuant to the provisions of this Agreement, the other Loan Documents, or any
other agreement incidental hereto and such default is not cured within 30 days,
or in the event that the Default is not curable within 30 days, and so long as
Borrower is diligently pursuing a cure thereof, within 60 days; or
(g) If the validity of any of such documents has been disaffirmed by
or on behalf of any of the parties thereto other than U. S. Bank and such
default is not cured within 30 days; or
(h) If custody or control of any substantial part of the property of
Borrower is assumed by any Governmental Body or if any Governmental Body takes
any final action, the effect of which would be to have a material adverse effect
on Borrower; or
(i) If Borrower suspends or discontinues its business, or if Borrower
makes an assignment for the benefit of creditors or a composition with
creditors, is unable or admits in writing its inability to pay its debts as they
mature, files a petition in bankruptcy, becomes insolvent (howsoever such
insolvency may be evidenced), is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for the appointment of any receiver, liquidator, or
trustee of or for it or any substantial part of its property or assets,
commences any proceeding relating to it under any Applicable Law of any
jurisdiction whether now or hereafter in effect relating to bankruptcy,
reorganization, arrangement, readjustment of debt, receivership, dissolution, or
liquidation; or if there is commenced against Borrower any such proceeding that
remains undismissed for a period of 60 days or more, or an order, judgment,
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or decree approving the petition in any such proceeding is entered; or if
Borrower by any act or failure to act indicates its consent to, approval of, or
acquiescence in, any such proceeding or any appointment of any receiver,
liquidator, or trustee of or for it or for any substantial part of its property
or assets, suffers any such appointment to continue undischarged or unstayed for
a period of 60 days or more, or takes any corporate action for the purpose of
effecting any of the foregoing; or if any court of competent jurisdiction
assumes jurisdiction with respect to any such proceeding, or if a receiver or a
trustee or other officer or representative of a court or of creditors, or if any
Governmental Body, under color of legal authority, takes and holds possession of
any substantial part of the property or assets of Borrower; or
(j) If there is any refusal or failure by any Governmental Body to
issue, renew, or extend any lease or Governmental Approval with respect to the
operation of the business of Borrower, or any denial, forfeiture or revocation
by any Governmental Body of any Governmental Approval that could have a material
adverse effect on Borrower; or
(k) If, after the date of this Agreement, any Person or Persons
during the terms of the Loans acquire an aggregate 50 percent or more of the
outstanding shares of voting stock of Borrower; PROVIDED, HOWEVER, that there
shall be excluded from the calculation of the percentage of voting stock
acquired, any voting stock acquired by shareholders of Borrower as of the date
of this Agreement; or
(l) If any material adverse change in the business or financial
condition of Borrower occurs and in the reasonable opinion of U. S. Bank, such
material adverse change will substantially impair Borrower's ability to repay
the Loans.
9.2 ACCELERATION; REMEDIES. Upon the occurrence of any Event of
Default or at any time thereafter, if any Event of Default is then continuing,
U. S. Bank may, by written notice to Borrower, declare the entire unpaid
principal balance or any portion of the principal balance of all or any of the
Notes and interest accrued thereon to be immediately due and payable by the
maker thereof; and such principal and interest shall thereupon become and be
immediately due and payable, without presentation, demand, protest, notice of
protest, or other notice of dishonor of any kind (except as otherwise provided
herein), all of which are hereby expressly waived by Borrower. U. S. Bank may
proceed to protect and enforce its rights hereunder or realize on any or all
security granted pursuant hereto in any manner or order it deems expedient
without regard to any equitable principles of marshaling or otherwise. All
rights and remedies given by this Agreement, the Notes, and the other Loan
Documents are cumulative and not exclusive of any thereof or of any other rights
or remedies available to U. S. Bank; no course of dealing between Borrower and
U. S. Bank or any delay or omission in exercising any right or remedy shall
operate as a waiver of any right or remedy; and every right and remedy may be
exercised from time to time and as often as deemed appropriate by U. S. Bank.
- 35 -
ARTICLE X. MISCELLANEOUS
10.1 NOTICES. All notices, requests, consents, demands, approvals,
and other communications hereunder shall be deemed to have been duly given,
made, or served if made in writing and delivered personally, sent via facsimile,
or mailed by first class mail, postage prepaid, to the respective parties to
this Agreement as follows:
(a) If to Borrower:
Apex PC Solutions, Inc.
00000 - 000xx Xxxxxx XX
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Facsimile No.: (000) 000-0000
with copy to:
Xxxxx Xxxxxx Xxxxxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
(b) If to U. S. Bank:
U. S. Bank of Washington, National Association
00000 XX Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
The designation of the persons to be so notified or the address of such persons
for the purposes of such notice may be changed from time to time by similar
notice in writing, except that any communication with respect to a change of
address shall be deemed to be given or made when received by the party to whom
such communication was sent.
10.2 PAYMENT OF EXPENSES. Whether or not the transactions hereby
contemplated are consummated, Borrower shall pay on demand all costs and
expenses of U. S. Bank incurred in connection with the preparation, negotiation,
execution, and delivery of the Loan Documents, as well as any amendments,
modifications, consents, or waivers relating thereto, including, without
limitation, reasonable attorney fees, appraisal fees, and recording fees. In
addition, if there shall occur any Default or Event of Default, U. S. Bank shall
be entitled to recover any reasonable costs and expenses incurred in connection
with the preservation of rights under, and enforcement of, the Loan Documents,
whether or not any
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lawsuit or arbitration proceeding is commenced, in all such cases, including,
without limitation, reasonable attorney fees and costs. Reasonable attorney
fees shall include, without limitation, attorney fees and costs incurred in
connection with any bankruptcy case or other insolvency proceeding commenced by
or against Borrower or any Person granting a security interest in any item of
Collateral, including all fees incurred in connection with (a) moving from
relief from the automatic stay, to convert or dismiss the case or proceeding, or
to appoint a trustee or examiner, or (b) proposing or opposing confirmation of a
plan of reorganization or liquidation, in any case without regarding to the
identity of the prevailing party.
10.3 SETOFF. Borrower hereby pledges and gives to U. S. Bank, and any
Participant, a lien and security interest in for the amount of all present and
future Indebtedness of Borrower to U. S. Bank the balance of any deposit account
maintained by Borrower at U. S. Bank or any Participant. During the existence
of any Event of Default, Borrower hereby authorizes U. S. Bank or any such
Participant at U. S. Bank's sole option, at any time and from time to time, to
apply to the payment of all or any portion of the Loans or other Indebtedness of
Borrower to U. S. Bank, any deposit balance or balances now or hereafter in the
possession of U. S. Bank or such Participant that belong to or are owed to
Borrower.
10.4 NO WAIVER. No failure or delay on the part of U. S. Bank or the
holder of any of the Notes in exercising any right, power, or privilege
hereunder and no course of dealing between Borrower and U. S. Bank or the holder
of any of the Notes shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power, or privilege hereunder preclude any other
or further exercise thereof or the exercise of any right, power, or privilege.
The rights and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies that U. S. Bank or any subsequent holder of
any of the Notes would otherwise have. No notice to or demand on Borrower in
any case shall entitle Borrower to any other or further notice or demand in
similar or other circumstances or shall constitute a waiver of the right of
U. S. Bank to any other or further action in any circumstances without notice or
demand.
10.5 ENTIRE AGREEMENT AND AMENDMENTS. This Agreement and the other
Loan Documents represent the entire agreement between the parties hereto with
respect to the Loans and the transactions contemplated hereunder and, except as
expressly provided herein, shall not be affected by reference to any other
documents. This Agreement, or any provision hereof, may not be changed, waived,
discharged, or terminated orally, but only by an instrument in writing, signed
by the party against whom enforcement of the change, waiver, discharge, or
termination is sought.
10.6 BENEFIT OF AGREEMENT. This Agreement is binding upon and inures
to the benefit of Borrower and U. S. Bank and their successors and assigns and
all subsequent holders of any of the Notes or any portion thereof. Without the
prior written consent of Borrower, which consent shall not be unreasonably
withheld, U. S. Bank shall not assign
- 37 -
rights or participations hereunder or any portion thereof to another Person,
except for assignments in connection with any acquisition of U. S. Bank and
assignments or participations required by any Governmental Body. Borrower,
however, is precluded from assigning any of its respective rights or delegating
any of its obligations hereunder or under any of the other agreements between
Borrower and U. S. Bank without the prior written consent of U. S. Bank.
10.7 SEVERABILITY. If any provision of this Agreement or any of the
Loan Documents is held invalid under any Applicable Laws, such invalidity shall
not affect any other provision of this Agreement that can be given an effect
without the invalid provision, and, to this end, the provisions hereof are
severable.
10.8 DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and do not affect
the meaning or construction of any of the provisions hereof.
10.9 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder and under the other Loan Documents shall be construed in
accordance with and shall be governed by the laws of the state of Washington
without regard to the choice of law rules thereof.
10.10 CONSENT TO JURISDICTION, SERVICE, AND VENUE. For the
purpose of enforcing payment of any of the Notes, performance of the obligations
under any of the Notes, any arbitration award under the other Loan Documents, or
otherwise in connection herewith, Borrower hereby consents to the jurisdiction
and venue of the courts of the state of Washington or of any federal court
located in such state including but not limited to the Superior Court of
Washington for King County and the United States District Court for the Western
District of Washington. Borrower hereby waives the right to contest the
jurisdiction and venue of courts located in King County, Washington, on the
ground of inconvenience or otherwise and waives any right to bring any action or
proceeding against U. S. Bank in any court outside King County, Washington. The
provisions of this section do not limit or otherwise affect the right of
U. S. Bank to institute and conduct action in any other appropriate manner,
jurisdiction, or court.
10.11 ARBITRATION.
(a) Either Borrower or U. S. Bank may require that all disputes,
claims, counterclaims, and defenses, including those based on or arising from
any alleged tort ("Claims") relating in any way to the Loans be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association and Title 9 of the U.S. Code. All Claims will
be subject to the statutes of limitations that would be applicable if they were
litigated.
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(b) This provision is void if the Loans, at the time of the proposed
submission to arbitration, are secured by real property located outside of
Oregon or Washington or if the effect of the arbitration procedure (as opposed
to any Claims of Borrower) would be to materially impair U. S. Bank's ability to
realize on any Collateral pursuant to an arbitration ruling favorable to
U. S. Bank.
(c) If arbitration occurs and each party's Claim is less than
$100,000, one neutral arbitrator will decide all issues; if either party's Claim
is more than $100,000, three neutral arbitrators will decide all issues. All
arbitrators will be active Washington State Bar members in good standing. All
arbitration hearings will be held in Seattle, Washington. In addition to all
other powers, the arbitrator or arbitrators shall have the exclusive right to
determine all issues of arbitrability and shall have the authority to issue
subpoenas. Judgment on any arbitration award may be entered in any court with
jurisdiction.
(d) If either party institutes any judicial proceeding relating to
the Loans, that action shall not be a waiver of the right to submit any Claim to
arbitration. In addition, each has the right before, during, and after any
arbitration to exercise any number of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
nonjudicial foreclosure against real or personal collateral, (iv) provisional
remedies, including injunction, appointment of a receiver, attachment, claim and
delivery, and replevin.
(e) This arbitration clause cannot be modified or waived by either
party except in writing, which writing must refer to this arbitration clause and
be signed by Borrower and U. S. Bank.
10.12 COUNTERPARTS. This Agreement and each of the Loan Documents
may be executed in one or more counterparts, each of which shall constitute an
original agreement, but all of which together shall constitute one and the same
instrument.
10.13 STATUTORY NOTICE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO
LOAN MONEY, EXTEND CREDIT, OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
- 39 -
IN WITNESS WHEREOF, Borrower and U. S. Bank have caused this Agreement
to be duly executed by the respective, duly authorized signatories as of the
date first above written.
APEX PC SOLUTIONS, INC.
By /s/ Xxxxx X. Xxxxx
------------------------------------------
Title President
---------------------------------------
U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION
By /s/ Xxxx X. Xxxxxxxx
------------------------------------------
Title Vice President
---------------------------------------
- 40 -
SECURITY AGREEMENT
This security agreement ("Agreement") is made and entered into as of
December 28, 1995, by APEX PC SOLUTIONS, INC., a Washington corporation
("Borrower"), for the benefit of U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION,
a national banking association ("U. S. Bank").
R E C I T A L S :
A. Concurrently with the execution hereof, U. S. Bank and Borrower
entered into a credit agreement (together with all supplements, exhibits, and
amendments thereto, referred to as the "Credit Agreement"), pursuant to which
U. S. Bank agreed to extend to Borrower credit facilities as more fully
described therein (the "Loans").
B. Borrower wishes to grant to U. S. Bank a security interest in all
its assets as security for all the Secured Obligations.
NOW, THEREFORE, in order for U. S. Bank to make the Loans, Borrower
agrees as follows:
ARTICLE I. DEFINITIONS
Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings when used herein. For the purposes of this
Agreement, the following terms shall have the following meanings:
"Account" means any right to payment for goods sold or leased or for
services rendered that is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"Account Debtor" means the party who is obligated on or under any
Account, Chattel Paper, or General Intangible.
"Assignee Deposit Account" shall have the meaning set forth in
SECTION 5.7 hereof.
"Chattel Paper" means all interest of Borrower in writings that
evidence both a monetary obligation and a security interest in or a lease of
specific goods, including any group of writings consisting of both a security
agreement or a lease and an Instrument or series of Instruments.
"Collateral" means all property, real, personal, and mixed, tangible
and intangible, wherever located, now owned or hereafter acquired by Borrower,
or in which
- 1 -
Borrower has or later obtains an interest, and all products, profits, rents, and
proceeds of such property, including but not limited to Accounts, Chattel Paper,
Deposit Accounts, Documents, Equipment, Financial Assets, General Intangibles,
Goods, Instruments, Inventory, Investment Property, Trademarks, Software, and
Vehicles.
"Deposit Account" means a demand, time, savings, passbook, or like
account maintained with a bank, savings and loan association, credit union, or
like organization, other than an account evidenced by a certificate of deposit.
"Document" means all of Borrower's right, title, and interest in or to
any document of title as defined in RCW 62A.1-201 and any receipt of the kind
described in RCW 62A.7-201(2).
"Equipment" means all of Borrower's right, title, and interest in and
to Goods that are used or bought for use primarily in business and that are not
included within the definition of Inventory, including but not limited to all
machinery, equipment, furnishings, fixtures, vehicles, tools, supplies, and
other equipment of any kind and nature and all additions, substitutions, and
replacements of any of the foregoing, together with all attachments, components,
parts, accessories, improvements, upgrades, and accessories installed thereon or
affixed thereto.
"Event of Default" means an occurrence of an Event of Default as
defined in the Credit Agreement.
"Financial Assets" means all of Borrower's right, title, and interest
in and to any financial asset as defined in RCW 62A.8-102.
"General Intangibles" means all personal property (including things in
action) other than Goods, Accounts, Chattel Paper, Documents, Financial Assets,
Instruments, Investment Property, and money, including but not limited to all
Trademarks, Software, insurance proceeds, patents, copyrights, trade names,
trade secrets, goodwill, registration, license rights, licenses, permits,
corporate and other business records, rights to refunds or indemnification, and
all other intangible personal property of Borrower of every kind and nature.
"Goods" means all things that are movable or that are fixtures, not
including money, Documents, Financial Assets, Instruments, Accounts, Chattel
Paper, Investment Property, or General Intangibles.
"Instrument" means any negotiable instrument or other writing that
evidences a right to the payment of money and is not itself a security agreement
or lease and is of a type that is in the ordinary course of business transferred
by delivery with any necessary endorsement or assignment.
- 2 -
"Inventory" means all Goods held by Borrower for sale or lease,
furnished or to be furnished by Borrower under any contract of service, or held
by Borrower as raw materials, work in progress, or materials used or consumed in
Borrower's business.
"Investment Property" means all of Borrower's right, title, and
interest in and to any investment property as defined in RCW 62A.9-115.
"Secured Obligations" means (a) any present or future Indebtedness of
Borrower to U. S. Bank, now existing or hereafter created, under the Credit
Agreement, the Notes, or the other Loan Documents, including any refinancing,
renewal, replacement, extension, amendment, or substitution of such
indebtedness, (b) any liability or obligation of Borrower hereunder, and (c) any
cost, expense, or liability, including but not limited to reasonable attorney
fees, that may be incurred and advances that may be made by U. S. Bank in any
way in connection with any of the foregoing or any security therefor.
"Software" means all of Borrower's computer software in all of its
forms and manifestations, including without limitation, all source materials,
source codes, object codes, binary forms, source language statements,
specifications, disks, tapes, programs, program layouts, formulae, technical
information, designs, diagrams, models, flow charts, manufacturing processes,
engineering data and techniques, instructions, manuals, patents, copyrights,
mask works, trademarks, trade secrets, and other general intangibles and
contract rights arising out of or relating thereto.
"Trademark" means (a) any trademark, trade name, corporate name,
company name, business name, fictitious business name, trade style, service
xxxx, logo or other source or business identifier, and the goodwill associated
therewith, now existing or hereafter adopted or acquired, any registration or
recording thereof, and any application in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States or of any state thereof, or any other country or any political
subdivision thereof, or otherwise, including but not limited to any thereof
referred to in SCHEDULE I hereto, and (b) all renewals thereof.
"Vehicle" means any car, truck, trailer, construction or earth-moving
equipment, or other vehicle covered by a certificate of title of any state,
including but not limited to any tires or other appurtenances to any of the
foregoing.
ARTICLE II. GRANT OF SECURITY INTEREST
As security for the payment and satisfaction of the Secured
Obligations, Borrower hereby grants to U. S. Bank a continuing security interest
in and assigns to U. S. Bank all of Borrower's right, title, and interest in the
Collateral and all products, profits, rents, and proceeds thereof.
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ARTICLE III. COVENANTS OF BORROWER
Borrower shall fully perform each of the covenants set forth below.
3.1 OBLIGATIONS TO PAY.
(a) Borrower shall pay to U. S. Bank, in timely fashion and in full,
all amounts payable by Borrower to U. S. Bank, pursuant to the Credit Agreement,
the Notes, and the other Loan Documents; and
(b) Borrower shall pay and reimburse U. S. Bank for all reasonable
expenditures including reasonable attorney fees and legal expenses in connection
with the exercise by U. S. Bank of any of its rights or remedies under the
Credit Agreement or the other Loan Documents.
3.2 PERFORMANCE. Borrower shall fully perform in a timely fashion
every covenant, agreement, and obligation set forth in the Credit Agreement and
the other Loan Documents.
3.3 FURTHER DOCUMENTATION. At its own expense, Borrower shall
execute and deliver any financing statement, any renewal, substitution, or
correction thereof, or any other document; shall procure any document; and shall
take such further action as U. S. Bank may reasonably require in obtaining the
full benefits of this Agreement.
3.4 FILING FEES. Borrower shall pay all costs of filing any
financing, continuation, or termination statement with respect to the security
interests granted herein.
3.5 PLEDGES. Borrower shall deliver and pledge to U. S. Bank,
endorsed or accompanied by instruments of assignment or transfer satisfactory to
U. S. Bank, any Instruments, Investment Property, Documents, General
Intangibles, or Chattel Paper that U. S. Bank may specify from time to time.
3.6 MAINTENANCE OF RECORDS. Borrower shall keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral
including but not limited to a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Borrower shall xxxx its books and records pertaining to the
Collateral to evidence this Agreement and the security interests granted herein.
Borrower shall deliver and turn over to U. S. Bank all books and records
pertaining to the Collateral at any time after the occurrence and during the
continuation of an Event of Default, if so demanded by U. S. Bank.
3.7 DISPOSITION OF COLLATERAL. Except as allowed in the Credit
Agreement and except in the ordinary course of Borrower's business, Borrower
shall not sell or transfer
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any of the Collateral or release, compromise, or settle any obligation or
receivable due to Borrower.
3.8 INDEMNIFICATION. Borrower agrees to pay, and to indemnify
U. S. Bank and hold U. S. Bank harmless from, all liabilities, costs, and
expenses including but not limited to reasonable legal fees and expenses with
respect to or resulting from (a) any delay in paying any excise, sales, or other
taxes that may be payable or determined to be payable with respect to any of the
Collateral, (b) any delay by Borrower in complying with any requirement of law
applicable to any of the Collateral, or (c) any of the transactions contemplated
by this Agreement. In any suit, proceeding, or action brought by U. S. Bank
under any Account to enforce payment of any sum owing thereunder or to enforce
any provisions of any Account, Borrower will indemnify U. S. Bank and hold
U. S. Bank harmless from all expense, loss, or damage suffered by reason of any
defense, setoff, counterclaim, recoupment, reduction, or liability whatsoever of
the Account Debtor thereunder arising out of a breach by Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness, or
liability at any time owing to or in favor of such Account Debtor or its
successors from Borrower.
3.9 LIMITATIONS ON AMENDMENTS, MODIFICATIONS, TERMINATIONS, WAIVERS,
AND EXTENSIONS OF CONTRACTS AND AGREEMENTS GIVING RISE TO ACCOUNTS. Except as
allowed in the Credit Agreement, and except in the ordinary course of Borrower's
business, Borrower will not (a) amend, modify, terminate, waive, or extend any
provision of any agreement giving rise to an Account in any manner that could
reasonably be expected to have a material adverse effect on the value of such
Account as Collateral or (b) fail to exercise promptly and diligently every
material right that it may have under each agreement giving rise to an Account,
other than any right of termination.
3.10 LIMITATIONS ON DISCOUNTS, COMPROMISES, AND EXTENSIONS OF
ACCOUNTS. Except as allowed in the Credit Agreement, and except in the ordinary
course of Borrower's business, Borrower will not grant any extension of the time
of payment of any of the Accounts; compromise, compound, or settle the same for
less than the full amount thereof; release, wholly or partially, any Person
liable for the payment thereof; or allow any credit or discount whatsoever
thereon.
3.11 FURTHER IDENTIFICATION OF COLLATERAL. Borrower will furnish to
U. S. Bank from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as U. S. Bank may request, all in reasonable detail.
3.12 NOTICES. Borrower will advise U. S. Bank promptly in reasonable
detail at its address set forth in SECTION 7.9 (a) of any lien (other than liens
created hereby or permitted under the Credit Agreement) on or claim asserted
against any of the Collateral and (b) of the occurrence of any other event that
could reasonably be expected to have a material adverse effect on the Collateral
or on the liens created hereunder.
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3.13 CHANGES IN LOCATIONS, NAME, ETC. Borrower will not (a) change
the location of its chief executive office/chief place of business from that
specified in SECTION 4.10 or remove its books and records from the location
specified in SECTION 4.7, (b) permit any of the Inventory or Equipment
(excluding Vehicles) to be kept at locations other than those listed on
SCHEDULE II hereto, or (c) change its name, identity, or structure to such an
extent that any financing statement filed by U. S. Bank in connection with this
Agreement would become seriously misleading, unless it shall have given
U. S. Bank at least ten days' prior written notice thereof.
3.14 TRADEMARKS.
(a) Borrower (either itself or through licensees) will (i) continue
to use each Trademark on each and every trademark class of goods applicable to
its current line as reflected in its current catalogs, brochures, and price
lists in order to maintain such Trademark in full force free from any claim of
abandonment for nonuse, unless Borrower obtains the prior written consent of
U. S. Bank which consent shall not be withheld unreasonably, (ii) maintain as in
the past the quality of products and services offered under such Trademark,
(iii) employ such Trademark with the appropriate notice of registration, (iv)
not adopt or use any xxxx that is confusingly similar to or a colorable
imitation of such Trademark unless U. S. Bank shall obtain a perfected security
interest in such xxxx pursuant to this Agreement, and (v) not (and not permit
any licensee or sublicensee thereof to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated.
(b) Borrower will notify U. S. Bank immediately if it knows, or has
reason to know, of (i) any application or registration relating to any Trademark
material to its business that may become abandoned or dedicated, or (ii) any
adverse determination or development (including but not limited to the
institution of, or any adverse determination or development in, any proceeding
in the United States Patent and Trademark Office or any court or tribunal in any
country) regarding Borrower's ownership of any material Trademark or its right
to register, keep, or maintain the same.
(c) Whenever Borrower, either by itself or through any agent,
employee, licensee, or designee, shall file an application for the registration
of any material Trademark with the United States Patent and Trademark Office or
any similar office or agency in any other country or any political subdivision
thereof, Borrower shall report such filing to U. S. Bank within five Business
Days after the last day of the calendar month in which such filing occurs.
Borrower shall execute and deliver to U. S. Bank all agreements, instruments,
powers of attorney, documents, and papers that U. S. Bank may request to
evidence U. S. Bank's security interest in any Trademark and in the goodwill and
general intangibles of Borrower relating to or represented by the Trademark.
Borrower hereby constitutes U. S. Bank its attorney-in-fact, such appointment to
take effect upon the occurrence and to remain in effect during the continuation
of an Event of Default, to execute and file all such writings for the foregoing
purposes, with all acts of such attorney being hereby ratified and
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confirmed; and such power, being coupled with an interest, is irrevocable until
all Secured Obligations are paid in full.
(d) Borrower will take all reasonable and necessary steps, including
but not limited to all reasonable and necessary steps in any proceeding before
the United States Patent and Trademark Office or any similar office or agency in
any other country or any political subdivision thereof, to maintain and pursue
each application, to obtain the relevant registration, and to maintain each
registration of material Trademarks, including but not limited to filing
applications for renewal, affidavits of use, and affidavits of incontestability.
(e) If any Trademark that is included in the Collateral is infringed,
misappropriated, or diluted by a third party, Borrower shall promptly notify
U. S. Bank after it learns thereof and shall take such action as Borrower
reasonably deems appropriate under the circumstances to protect such Trademark.
3.15 VEHICLES. Within 30 days after the date of acquisition of any
Vehicle constituting Collateral, the application for certificate of title
thereto indicating U. S. Bank's first priority lien on such Vehicle, and any
other necessary documentation, shall be filed in each office in each
jurisdiction that U. S. Bank deems advisable to perfect its lien on any Vehicle
constituting Collateral.
3.16 SOFTWARE. Borrower agrees to execute and deliver to U. S. Bank
from time to time upon U. S. Bank's reasonable request, any and all instruments,
documents, financing statements, registration statements, applications for
registration, and other documents reasonably deemed necessary by U. S. Bank to
perfect or otherwise give constructive notice of its security interest in the
Software or any portion thereof, including Software hereafter created or
acquired by Borrower. Any such action shall give due recognition to Borrower's
interest in preserving the confidentiality of the Software.
(a) ACCESS TO SOFTWARE. U. S. Bank shall have no access to the
Software unless and until there shall occur and be continuing an Event
of Default. If there shall occur and be continuing an Event of
Default, Borrower shall, at the request of U. S. Bank, assemble and
deliver to U. S. Bank the Software, and shall cooperate with
U. S. Bank in disposing of the same, in realization of its security
interest therein. Borrower hereby acknowledges and agrees that any
disposition of the Software by U. S. Bank in realization of its
security interest therein shall not be subject to any licenses or
restrictions, other than those licenses or other rights of third
parties to use, modify, and distribute the Software heretofore granted
by Borrower, and those licenses and other rights that Borrower may
grant in the future in the ordinary course of business or pursuant to
the Credit Agreement. U. S. Bank and any other third party claiming
through U. S. Bank shall take the Software subject to the rights of
parties other than Borrower arising out of such licenses and other
rights.
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(b) NEGATIVE COVENANT. Borrower covenants and agrees that so
long as it is indebted to U. S. Bank, Borrower shall not, without the
prior written consent of U. S. Bank, sell, license, assign, or
otherwise convey or encumber the Software to any person or entity
provided that Borrower may license the use, modification, and
distribution of the Software in the ordinary course of Borrower's
business.
3.17 INSURANCE. Borrower agrees to insure the Collateral against all
hazards in form and amount reasonably satisfactory to U. S. Bank. If Borrower
fails to obtain such insurance, U. S. Bank shall have the right, but not the
obligation, to obtain either insurance covering both Borrower's and U. S. Bank's
interest in the Collateral, or insurance covering only U. S. Bank's interest in
the Collateral. Borrower agrees to pay any premium charged for such insurance.
This amount may be added to the outstanding balance of the Loans, and interest
thereon shall be charged at the rate specified in any applicable loan document,
or U. S. Bank may demand immediate payment. Any unpaid insurance premium
advanced by U. S. Bank shall be secured under the terms of this Agreement.
U. S. Bank will have no liability whatsoever for any loss which may occur by
reason of the omission or lack of coverage of any such insurance. Borrower
hereby assigns to U. S. Bank the right to receive proceeds of such insurance to
the full amount of the Secured Obligations and hereby directs any insurer to pay
all proceeds directly to U. S. Bank, and authorizes U. S. Bank to endorse any
draft. In U. S. Bank's sole discretion, U. S. Bank may apply any insurance
proceeds either toward repair of the property or reduction of the balance of the
Secured Obligations.
3.18 COPY OF FINANCING STATEMENT. Borrower agrees that a carbon,
photographic, or other reproduction of a financing statement or this Agreement
is sufficient as a financing statement.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
Borrower hereby makes the following representations and warranties:
4.1 TITLE TO COLLATERAL. Except as set forth in the Credit
Agreement, Borrower has good and marketable title to all the Collateral, free
and clear of all liens excepting only the security interests created pursuant to
this Agreement or permitted pursuant to the Credit Agreement.
4.2 NO IMPAIRMENT OF COLLATERAL. None of the Collateral shall be
impaired or jeopardized because of the security interest herein granted, except
to the extent the granting of a security interest is prohibited, or consent to
or notice regarding the granting of a security interest is required, as set
forth in the Credit Agreement.
4.3 OTHER AGREEMENTS. The execution and delivery of this Agreement,
the consummation of the transactions provided for herein, and the fulfillment of
the terms hereof will not result in the material breach of any of the terms,
conditions, or provisions of, or
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constitute a material default under, or conflict with, or cause any acceleration
of any obligation under any (a) Applicable Law or (b) agreement or other
instrument to which Borrower is a party or by which Borrower is bound, except to
the extent the granting of a security interest is prohibited, or consent to or
notice regarding the granting of a security interest is required, as set forth
in the Credit Agreement.
4.4 NO APPROVALS. No Governmental Approvals of any nature are
required in connection with the security interests herein granted.
4.5 AUTHORITY. Borrower has full power and authority to assign to
U. S. Bank and to grant to U. S. Bank a security interest in the Collateral.
4.6 LOCATION OF RECORDS. The address of the office where the books
and records of Borrower are kept concerning the Collateral is set forth on
SCHEDULE II.
4.7 LOCATION OF COLLATERAL. The locations of all Inventory and
Equipment of Borrower are described on SCHEDULE II.
4.8 NAME. Borrower conducts its business only under the names "Apex
PC Solutions, Inc." and "Apex Computer Company."
4.9 ACCOUNTS. The amount represented by Borrower to U. S. Bank from
time to time as owing by each Account Debtor or by all Account Debtors in
respect of the Accounts will at such time be the correct amount actually owing
by such Account Debtor or Debtors thereunder. No material amount payable to
Borrower under or in connection with any Account is evidenced by any Instrument
or Chattel Paper that has not been delivered to U. S. Bank.
4.10 CHIEF EXECUTIVE OFFICE. Borrower's chief executive office and
chief place of business is located at the address set forth on SCHEDULE II.
4.11 TRADEMARKS. SCHEDULE I hereto includes all Trademarks owned by
Borrower in its own name as of the date hereof. To the best of Borrower's
knowledge, each such Trademark is valid, subsisting, unexpired, and enforceable
and has not been abandoned. Except as set forth in SCHEDULE I or the Credit
Agreement, none of such Trademarks is the subject of any licensing or franchise
agreement. No holding, decision, or judgment that would limit, cancel, or
question the validity of any such Trademark has been rendered by any
Governmental Body. No action or proceeding is pending that (a) seeks to limit,
cancel, or question the validity of any such Trademark or (b) would, if
adversely determined, have a material adverse effect on the value of any
Trademark.
4.12 VEHICLES. SCHEDULE III is a complete and correct list of all
Vehicles owned by Borrower on the date hereof that constitute Collateral
hereunder. Borrower shall deliver to U. S. Bank the original certificate of
title for each Vehicle on the date hereof.
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Each certificate of title shall thereafter indicate U. S. Bank's first priority
lien on the Vehicle covered by such certificate. Borrower shall execute and
deliver to U. S. Bank any and all agreements, instruments, documents, powers of
attorney, and papers that U. S. Bank may request to evidence and perfect
U. S. Bank's security interest in any Vehicle. Borrower hereby constitutes
U. S. Bank its attorney-in-fact, such appointment to take effect upon the
occurrence and to remain in effect during the continuation of an Event of
Default, to execute and file all such writings for the foregoing purposes, with
all acts of such attorney being hereby ratified and confirmed; and such power,
being coupled with an interest, is irrevocable until all Secured Obligations are
paid in full.
ARTICLE V. U. S. BANK'S RIGHTS WITH RESPECT
TO THE COLLATERAL
5.1 NO DUTY ON U. S. BANK'S PART. U. S. Bank shall not be required
(except at its option upon the occurrence and during the continuation of any
Event of Default) to realize upon any Accounts, Financial Assets, Instruments,
Investment Property, Chattel Paper, or General Intangibles; collect the
principal, interest, or payment due thereon, exercise any rights or options of
Borrower pertaining thereto; make presentment, demand, or protest; give notice
of protest, nonacceptance, or nonpayment; or do any other thing for the
protection, enforcement, or collection of such Collateral. The powers conferred
on U. S. Bank hereunder are solely to protect U. S. Bank's interests in the
Collateral and shall not impose any duty upon U. S. Bank to exercise any such
powers. U. S. Bank shall be accountable only for amounts that U. S. Bank
actually receives as a result of the exercise of such powers; and neither
U. S. Bank nor any of its officers, directors, employees, or agents shall be
responsible to Borrower for any act or failure to act hereunder, except for
willful misconduct or gross negligence.
5.2 NEGOTIATIONS WITH ACCOUNT DEBTORS. Upon the occurrence and
during the continuation of any Event of Default, U. S. Bank may, in its sole
discretion, extend or consent to the extension of the time of payment or
maturity of any Instruments, Accounts, Chattel Paper, or General Intangibles.
5.3 RIGHT TO ASSIGN. Except as otherwise provided in the Credit
Agreement, U. S. Bank may assign or transfer the whole or any part of the
Secured Obligations and may transfer therewith as collateral security the whole
or any part of the Collateral; and all obligations, rights, powers, and
privileges herein provided shall inure to the benefit of the assignee and shall
bind the successors and assigns of the parties hereto.
5.4 DUTIES REGARDING COLLATERAL. Except as otherwise set forth in
SECTION 5.1, beyond the safe custody of the Collateral, U. S. Bank shall not
have any duty as to any Collateral in its possession or control, or as to any
preservation of any rights of or against other parties.
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5.5 COLLECTION FROM ACCOUNT DEBTORS. Upon the occurrence and during
the continuation of any Event of Default, Borrower shall, upon demand by
U. S. Bank (and without any grace or cure period), notify all Account Debtors to
make payment to U. S. Bank of any amounts due or to become due. Upon the
occurrence and during the continuation of an Event of Default, Borrower
authorizes U. S. Bank to contact the Account Debtors for the purpose of having
all or any of them pay their obligations directly to U. S. Bank. Upon the
occurrence and during the continuation of an Event of Default, Borrower shall
enforce collection of any indebtedness owed to it by Account Debtors.
5.6 INSPECTION. U. S. Bank and its designees, from time to time at
reasonable times and intervals, may inspect the Equipment and Inventory and
inspect, audit, and make copies of and extracts from all records and all other
papers in the possession of Borrower.
5.7 ASSIGNEE DEPOSIT ACCOUNT. Upon demand by U. S. Bank after the
occurrence and during the continuation of an Event of Default, Borrower will
transmit and deliver to U. S. Bank, in the form received, immediately after
receipt, all cash, checks, drafts, Chattel Paper, Instruments, or other writings
for the payment of money including Investment Property (properly endorsed, where
required, so that the items may be collected by U. S. Bank) that may be received
by Borrower at any time. All items or amounts that are delivered by Borrower to
U. S. Bank, or collected by U. S. Bank from the Account Debtors, shall be
deposited to the credit of a Deposit Account ("Assignee Deposit Account") of
Borrower with U. S. Bank, as security for the payment of the Secured
Obligations. Borrower shall have no right to withdraw any funds deposited in
the Assignee Deposit Account. U. S. Bank may, from time to time in its
discretion, and shall, upon the request of Borrower made not more than twice in
any week, apply all or any of the balance, representing collected funds, in the
Assignee Deposit Account, to payment of the Secured Obligations, whether or not
then due, in such order of application, not inconsistent with the terms of the
Credit Agreement and this Agreement, as U. S. Bank may determine; and U. S. Bank
may, from time to time in its discretion, release all or any of such balance to
Borrower.
ARTICLE VI. U. S. BANK'S RIGHTS AND REMEDIES
6.1 GENERAL. Upon the occurrence of any Event of Default, U. S. Bank
may exercise its rights and remedies in the Credit Agreement and in any other
Loan Documents and any other rights and remedies at law and in equity,
simultaneously or consecutively, all of which rights and remedies shall be
cumulative. The choice of one or more rights or remedies shall not be construed
as a waiver or election barring other rights and remedies. Borrower hereby
acknowledges and agrees that U. S. Bank is not required to exercise all rights
and remedies available to it equally with respect to all the Collateral and that
U. S. Bank may select less than all the Collateral with respect to which the
rights and remedies as determined by U. S. Bank may be exercised.
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6.2 NOTICE OF SALE; DUTY TO ASSEMBLE COLLATERAL. In addition to or
in conjunction with the rights and remedies referred to in SECTION 6.1 hereof:
(a) Written notice mailed to Borrower at the address designated
herein ten days or more prior to the date of public or private sale of any of
the Collateral shall constitute reasonable notice.
(b) If U. S. Bank requests, Borrower will assemble the Collateral and
make it available to U. S. Bank at places that U. S. Bank shall reasonably
select, whether on Borrower's premises or elsewhere.
ARTICLE VII. GENERAL PROVISIONS
7.1 ENTIRE AGREEMENT. This Agreement, together with the Credit
Agreement and the other Loan Documents, sets forth all the promises, covenants,
agreements, conditions, and understandings between the parties hereto with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements, or conditions,
express or implied, oral or written, with respect thereto, except as contained
or referred to herein. This Agreement may not be amended, waived, discharged,
or terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of such amendment, waiver, discharge, or termination is
sought.
7.2 INVALIDITY. If any provision of this Agreement shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereunder, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
7.3 NONWAIVER AND NONEXCLUSIVE RIGHTS AND REMEDIES.
(a) No right or remedy herein conferred upon or reserved to
U. S. Bank is intended to be to the exclusion of any other right or remedy, but
each and every such right or remedy shall be cumulative and shall be in addition
to every other right or remedy given hereunder and now or hereafter existing at
law or in equity.
(b) No delay or omission by U. S. Bank in exercising any right or
remedy accruing upon an Event of Default shall impair any such right or remedy,
or shall be construed to be a waiver of any such Event of Default, or an
acquiescence therein, nor shall it affect any subsequent Event of Default of the
same or of a different nature.
7.4 TERMINATION OF SECURITY INTEREST. When all the Secured
Obligations have been paid in full, the security interest provided herein shall
terminate and U. S. Bank shall return to Borrower all Collateral then held by
U. S. Bank, if any, and upon written request of Borrower, shall execute, in form
for filing, termination statements of the security
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interests herein granted. Thereafter, no party hereto shall have any further
rights or obligations hereunder.
7.5 SUCCESSORS AND ASSIGNS. All rights of U. S. Bank hereunder shall
inure to the benefit of its successors and assigns, and all obligations of
Borrower shall be binding upon its successors and assigns.
7.6 U. S. BANK'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Borrower hereby irrevocably constitutes and appoints U. S. Bank
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of Borrower and in the name of Borrower or in its own name, from
time to time in U. S. Bank's discretion, for the purpose of carrying out the
terms of this Agreement, upon the occurrence and during the continuation of an
Event of Default, to take any and all appropriate action, and to execute any and
all documents and instruments that may be reasonably necessary or desirable to
accomplish the purposes of this Agreement; and without limiting the generality
of the foregoing, Borrower hereby gives U. S. Bank the power and right, on
behalf of Borrower, without consent by or notice to Borrower, to do the
following:
(i) upon the occurrence and during the continuation of an Event
of Default, to transfer to U. S. Bank or to any other person all or
any of said Collateral, to endorse any Instruments pledged to
U. S. Bank, and to fill in blanks in any transfers of Collateral,
powers of attorney, or other documents delivered to U. S. Bank;
(ii) upon the occurrence and during the continuation of an Event
of Default, to pay or discharge taxes and liens levied or placed on or
threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Agreement, and to pay all or
any part of the premiums therefor and the costs thereof;
(iii) upon the occurrence and during the continuation of any Event of
Default (A) to take possession of, endorse, and collect any checks, drafts,
notes, acceptances, or other instruments for the payment of moneys due
under any Account, Instrument, or General Intangible or with respect to any
other Collateral and (B) to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by
U. S. Bank for the purpose of collecting all such moneys due under any
Account, Financial Assets, Instrument, Investment Property, or General
Intangible or with respect to any other Collateral whenever payable; and
(iv) upon the occurrence and during the continuation of any Event
of Default (A) to direct any party liable for any payment under any of
the
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Collateral to make payment of all moneys due or to become due thereunder
directly to U. S. Bank or as U. S. Bank shall direct; (B) to ask for,
demand, collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices, and
other documents in connection with any of the Collateral; (D) to commence
and prosecute any suits, actions, or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral; (E) to defend
any suit, action, or proceeding brought against Borrower with respect to
any Collateral; (F) to settle, compromise, or adjust any suit, action, or
proceeding described in clause (E) above and, in connection therewith, to
give such discharge or releases as U. S. Bank may deem appropriate; (G) to
assign any Trademark (along with the goodwill of the business to which any
such Trademark pertains) throughout the world for such terms or terms, on
such conditions, and in such manner as U. S. Bank shall in its sole
discretion determine; and (H) generally, to sell, transfer, pledge, and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though U. S. Bank were the absolute
owner thereof for all purposes; and to do, at U. S. Bank's option and
Borrower's expense, at any time or from time to time, all acts and things
that U. S. Bank deems necessary to protect, preserve or realize upon the
Collateral and U. S. Bank's liens thereon and to effect the intent of this
Agreement, all as fully and effectively as Borrower might do.
(b) Borrower hereby ratifies all that said attorneys shall lawfully
do or cause to be done by virtue hereof. This power of attorney is a power
coupled with an interest and shall be irrevocable.
(c) Borrower also authorizes U. S. Bank, at any time and from time to
time, to execute, in connection with the sale provided for in ARTICLE VI hereof,
any endorsements, assignments, or other instruments of conveyance or transfer
with respect to the Collateral.
(d) The powers conferred on U. S. Bank hereunder are solely to
protect U. S. Bank's interests in the Collateral and shall not impose any duty
upon U. S. Bank to exercise any such powers. U. S. Bank shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees, or agents
shall be responsible to Borrower for any act or failure to act hereunder, except
for willful misconduct or gross negligence.
7.7 PERFORMANCE BY U. S. BANK OF BORROWER'S OBLIGATIONS. If Borrower
fails to perform or comply with any of its agreements contained herein and
U. S. Bank, as
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provided for by the terms of this Agreement, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the expense of
U. S. Bank incurred in connection with such performance or compliance, together
with interest thereon at the rate provided for in the Credit Agreement upon the
occurrence of an Event of Default, shall be payable by Borrower to U. S. Bank on
demand and shall constitute Secured Obligations.
7.8 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder shall be construed and enforced in accordance with and
shall be governed by the laws of the state of Washington, without regard to the
choice of law rules thereof.
7.9 NOTICES. All notices, requests, consents, demands, approvals,
and other communications hereunder shall be deemed to have been duly given,
made, or served if in writing and when delivered personally, or sent via
facsimile, or mailed by first class mail, postage prepaid, to the respective
parties to this Agreement as follows:
(a) If to U. S. Bank:
U. S. Bank of Washington,
National Association
00000 X.X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx, Vice President
Facsimile number (000) 000-0000
(b) If to Borrower:
Apex PC Solutions, Inc.
00000 000xx Xxxxxx X.X.
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxx, President
Facsimile number (000) 000-0000
with a copy to:
Xxxxx Xxxxxx Xxxxxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile number (000) 000-0000
The designation of the person to be so notified or the address of such person
for the purposes of such notice may be changed from time to time by similar
notice in writing, except that
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any communication with respect to a change of address shall be deemed to be
given or made when received by the party to whom such communication was sent.
7.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original Agreement, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Borrower and U. S. Bank have caused these presents
to be duly executed by their respective duly authorized signatories as of the
day and year first above written.
APEX PC SOLUTIONS, INC.
By /s/ Xxxxx Xxxxx
------------------------------------
Xxxxx Xxxxx, President
ACCEPTED BY: U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION
By /s/ Xxxx X. Xxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxx, Vice President
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SCHEDULE I
TRADEMARKS
Marks published:
switchback sn: 74/621,260 pub date: 9/12/95
viewpoint sn: 74/621,261 pub date: 9/12/95
Marks filed:
vista 11/13/95 sn: 75/017990
outlook 11/13/95 sn: 75/018077
oscar 11/13/95 sn: 75/018078
Patents applied for:
Computer Inconnection System sn: 08/519,193 filed: 8/25/95 (includes
oscar)
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SCHEDULE II
Address of
chief executive office:
00000 000xx Xxxxxx X.X.
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Address of Office where
books and records are kept:
00000 000xx Xxxxxx X.X.
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Addresses of locations of
collateral:
00000 000xx Xxxxxx X.X.
Xxxxxxxxxxx, Xxxxxxxxxx 00000
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SCHEDULE III
VEHICLES
None, except forklift leased pursuant to Safeline lease described in the Credit
Agreement.
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TERM NOTE
$6,000,000 December 28, 1995
For value received, the undersigned, APEX PC SOLUTIONS, INC., a
Washington corporation ("Borrower"), promises to pay to the order of U. S. BANK
OF WASHINGTON, NATIONAL ASSOCIATION ("U. S. Bank"), at its principal place of
business, 00000 X.X. Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, or such other
place or places as the holder hereof may designate in writing, the principal sum
of Six Million Dollars ($6,000,000) or so much thereof as advanced by U. S. Bank
in lawful, immediately available money of the United States of America, in
accordance with the terms and conditions of that certain credit agreement of
even date herewith by and between Borrower and U. S. Bank (together with all
supplements, exhibits, amendments and modifications thereto, the "Credit
Agreement"). Borrower also promises to pay interest on the unpaid principal
balance hereof, commencing as of the first date of an advance hereunder, in like
money in accordance with the terms and conditions, and at the rate or rates
provided for in the Credit Agreement. All principal, interest, and other
charges are due and payable in full on December 31, 2002.
Borrower and all endorsers, sureties, and guarantors hereof jointly
and severally waive presentment for payment, demand, notice of nonpayment,
notice of protest, and protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, dishonor, or enforcement of
the payment of this Note except such notices as are specifically required by
this Note or by the Credit Agreement, and they agree that the liability of each
of them shall be unconditional without regard to the liability of any other
party and shall not be in any manner affected by any indulgence, extension of
time, renewal, waiver, or modification granted or consented to by U. S. Bank.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by U. S. Bank with respect to the payment or other provisions of this
Note and the Credit Agreement; (2) consent to the release of any property now or
hereafter securing this Note with or without substitution; and (3) agree that
additional makers, endorsers, guarantors, or sureties may become parties hereto
without notice to them and without affecting their liability hereunder.
This Note is the Term Note referred to in the Credit Agreement and as
such is entitled to all of the benefits and obligations specified in the Credit
Agreement, including but not limited to any Collateral and any conditions to
making advances hereunder. Terms
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defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the repayment of
this Note and the acceleration of the maturity hereof.
APEX PC SOLUTIONS, INC.
By /s/ Xxxxx Xxxxx
---------------------------------
Xxxxx Xxxxx, President
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REVOLVING NOTE
$3,000,000 December 28, 1995
For value received, the undersigned, APEX PC SOLUTIONS, INC., a
Washington corporation ("Borrower"), promises to pay to the order of U. S. BANK
OF WASHINGTON, NATIONAL ASSOCIATION ("U. S. Bank"), at its principal place of
business, 00000 X.X. Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, or such other
place or places as the holder hereof may designate in writing, the principal sum
of Three Million Dollars ($3,000,000) or so much thereof as advanced by
U. S. Bank in lawful, immediately available money of the United States of
America, in accordance with the terms and conditions of that certain credit
agreement of even date herewith by and between Borrower and U. S. Bank (together
with all supplements, exhibits, amendments and modifications thereto, the
"Credit Agreement"). Borrower also promises to pay interest on the unpaid
principal balance hereof, commencing as of the first date of an advance
hereunder, in like money in accordance with the terms and conditions, and at the
rate or rates provided for in the Credit Agreement. All principal, interest,
and other charges are due and payable in full on January 15, 1997.
Borrower and all endorsers, sureties, and guarantors hereof jointly
and severally waive presentment for payment, demand, notice of nonpayment,
notice of protest, and protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, dishonor, or enforcement of
the payment of this Note except such notices as are specifically required by
this Note or by the Credit Agreement, and they agree that the liability of each
of them shall be unconditional without regard to the liability of any other
party and shall not be in any manner affected by any indulgence, extension of
time, renewal, waiver, or modification granted or consented to by U. S. Bank.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by U. S. Bank with respect to the payment or other provisions of this
Note and the Credit Agreement; (2) consent to the release of any property now or
hereafter securing this Note with or without substitution; and (3) agree that
additional makers, endorsers, guarantors, or sureties may become parties hereto
without notice to them and without affecting their liability hereunder.
This Note is the Revolving Note referred to in the Credit Agreement
and as such is entitled to all of the benefits and obligations specified in the
Credit Agreement, including but not limited to any Collateral and any conditions
to making advances hereunder. Terms defined in the Credit Agreement are used
herein with the same meanings. Reference
- 1 -
is made to the Credit Agreement for provisions for the repayment of this Note
and the acceleration of the maturity hereof.
APEX PC SOLUTIONS, INC.
By /s/ Xxxxx Xxxxx
---------------------------------
Xxxxx Xxxxx, President
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EXHIBIT C
Prepayment Formula
Borrower may prepay the principal balance of the Loans in whole
or in part by paying, in addition to the principal payment, accrued interest and
any other sums due U. S. Bank at the time of prepayment, a yield maintenance
charge ("YMC") as determined by the following formula and if YMC is greater than
zero:
YMC = p x (i - y) x f
Where:
p = the prepaid principal amount.
i = the current interest rate.
y = the most current yield rate ("Yield Rate") on the U.S. Treasury
Security, with a term most closely matching the remaining term from
the date of prepayment to the end of the Yield Maintenance Period, as
reported under the heading "Week Ending" ("Auction average" for 3 or
6-month Treasury Bills) in the most currently available Federal
Reserve statistical release H.15(519) of the Board of Governors of the
Federal Reserve System.
n = the number of months, and any fraction thereof remaining, between the
prepayment date and the end of the Yield Maintenance Period.
(-n)
f = present value factor = 1 - (1 + y) .
-----------
y
"Yield Maintenance Period" means the time period from the date of
prepayment to the end of the applicable Interest Period.
If Borrower shall submit a payment amount in excess of the
principal, interest, and other amounts due U. S. Bank, the allocation of
principal and YMC shall be calculated based on the following formula:
a = p + YMC
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Where:
a = the excess amount to be applied.
p = the prepaid principal amount = a .
------------------
f x (i - y) + 1
YMC = a - p.
f, i, and y have the same meaning as stated above.
Any partial prepayment of the outstanding balance shall not
extend the due date of any subsequent monthly installments or change the amount
of such installments, unless U. S. Bank shall otherwise agree in writing.
Borrower shall pay the YMC due under the Credit Agreement whether
the prepayment is voluntary or involuntary (in connection with U. S. Bank's
acceleration of the unpaid principal balance of the Loans). Notwithstanding any
other provision herein to the contrary, Borrower shall not be required to pay
any YMC in connection with any prepayment occurring as a result of the
application of insurance proceeds or condemnation awards under U. S. Bank's
deeds of trust.
Should the Federal Reserve statistical release H.15(519) not be
available or discontinued, U. S. Bank shall choose another source or comparable
data in its sole and absolute discretion.
U. S. Bank's determination of the Yield Rate, date of H.15
report, Yield Maintenance Period and calculation of the formulas contained
herein shall be conclusive absent manifest error.
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